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UAE Diamond Jewellery Retailers Absorb VAT To Retain Customers

A growing number of diamond jewellery retailers in the United Arab Emirates (UAE) are now absorbing the just-introduced 5 percent Value Added Tax (VAT) on all jewellery, rather than passing them on to consumers who, they fear, might then gravitate toward plain-gold jewellery.

According to media reports, retailers reason that consumers are more likely to adapt to the higher prices due to VAT, of gold and gold jewellery, that is bought with a greater bias towards its investment value, but won’t be as willing to add the cost of the tax on higher-value diamond jewellery purchases which are driven more by emotional factors.

UAE retailers have spent the last several years building up a diamond-jewellery customer base by pushing the emotional value of the diamond. They don’t want to see that customer base eroded by an increase in price that would trigger unfavourable comparisons with plain-gold jewellery’s higher stored-value perception.

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