By Ranshitha Kularathne The gem industry last week urged the Government to bring in a measure of consistency to its tax policy, as ad hoc taxes and policy changes are preventing the industry from achieving its full potential. Interestingly, these requests come less than a month after the Government announced tax cuts on gold imports from 15% to 5% on requests made by industry leaders. Sri Lanka Gem and Jewellery Association (SLGJA) Chairman Ahsan Refai told The Sunday Morning Business that while the tax reduction was a beneficial move for the industry, maintaining policy consistency was more important as constant changes in policy can do more harm than good. “You can’t have one policy today and change it tomorrow. Either you have a systematic policy or you don’t talk about it – whether its tax or anything else. Constant policy changes do a lot of damage. The Government has reduced the tax to 5%. That’s fair enough, but it should not have happened like that. One cannot run on a trial and error basis. One needs to speak to traders, and come up with a consistent policy. Having one policy today and another policy in a week’s time can do serious damage. Silence would be a better option instead.” National Gem and Jewellery Authority (NGJA) Chairman Peshala Jayarathne Bandara too was in agreement on imposing a consistent tax policy for the industry. “We’re not at all happy with the tax structure but we informed higher authorities to maintain a consistent tax policy and tax reduction.” The Chairman added that the gem industry achieved revenue of $ 400 million for the year so far and aims to reach $ 1 billion by year end. Another SLGJA official told The Sunday Morning Business, on conditions of anonymity, that gem exports do not hold a favourable position and that the industry is likely to collapse soon unless a policy reform and tax reduction is implemented. He emphasised the consequences of the current tax policy, exampling the decline in buyers arriving in Sri Lanka to buy gems. “Buyers are psychologically reluctant to come here because they are under the impression that executing purchases in Sri Lanka adds extra costs to the price of the gems. Only long term customers, who are aware of the process, are comfortable enough to come here for their dealings.” Similar opinions were shared by other gem exporters on Sri Lankan gems being traded in locations such as Bangkok instead of buyers directly arriving in Sri Lanka for gem purchasing. Despite the substantial cost, most of the exporters follow the regulated export process, but individual and small scale exporters are believed to be trading Sri Lankan gems outside the country to avoid the excessive taxes. One of the pioneer gem exporters confirmed with The Sunday Morning Business that such a scenario is highly likely. “The process of buying Sri Lankan gems out of the country is likely to be happening at present, outside the regulated process. Organisations follow the regulated process, but individuals who export don't wait to clear out rules and regulations, and sell gems outside Sri Lanka.” Another exporter expressed his thoughts on the issue saying: “I think Sri Lankan gems are being traded outside of Sri Lanka, because the export process is not easy. People are fed up with too many conditions, regulations, and taxes. The ones who find buyers online through various platforms sell products in locations like Bangkok, because it’s much easier than getting the buyers here.” The exporters claimed that demand for Sri Lankan gems in the international market is fresh as ever but the inconsistent tax policies and prolonged export process severely places constrains on the industry from moving forward. Ruby and Sapphire (Pvt.) Ltd. Director Wazir Gafoor told The Sunday Morning Business: “The export process needs to be more flexible, because right now it’s a time consuming, lengthy process. The taxes need to be adjusted as it’s one of the biggest drawbacks in the local gem industry. The export process is not easy because of these regulations and taxes. Also, the evaluation process from NGAJ takes time for gem evaluation, but we’re not blaming them because they’re doing the job as they’re assigned to do.” However, the allegations of foreign gem hotspots being used for trades by Sri Lankans was denied by NGJA Chairman Peshala Jayarathne Bandara. “Local traders are exporting our gems and that's how most of the gem trading happens. Since our products are available in the international market, buyers don't need to come to Sri Lanka in the first place. “Generally, buyers and sellers meet in Sri Lanka or somewhere else. Whether it’s a small time exporter or a large scale one, they attend those affairs and meet the customers. But there have been certain issues, so they may have met somewhere else to carry out the transaction.” He said that this does not deprive Sri Lanka of foreign exchange. “Normally the money comes to Sri Lanka. Whether the deal happens in UK, Singapore, or any part of the world, no harm is done as that’s how trade has developed. So far, the required gains have been coming into Sri Lanka, and the gem industry is benefitting.” The uncertain future of Sri Lankan gem industry puts one million jobs at stake of those who are employed directly, and indirectly, in the industry. Competitors such as Thailand are dominating, while, once dominant, Sri Lanka’s momentum is declining due to the inconsistent tax policy, improper marketing, and lack of exposure in the global market.