Dubai-based jewelry companies leaving the emirate due to newly introduced taxes have started to bring their business to Istanbul.
Despite not having collected taxes from jewelry companies until recently, Dubai has recently introduced a 5 percent customs duty and 5 percent value added tax (VAT), pushing jewelry companies in the emirate to bring their operations to Istanbul.
Turkey, one of the centers of the international gold trade, has further come into prominence with this development. According to the Dünya daily, most of jewelry companies coming from Dubai over the past year have opened stores and workshops in the Kuyumcukent, Grand Bazaar and Nuruosmaniye districts of Istanbul.
Dubai's domestic jewelry producers and exporters, foreseeing that the emirate will move away from being a gold trading center due to the new taxes, are planning to bring their companies to Turkey.
Ayhan Güner, head of the Turkish Jewelry Exporters' Association, said: "We want to make Istanbul one of the most important centers of the gold trade. Dubai will lose this position because of the new taxes."
According to Güner, 110 companies, most of them from Dubai, have come to Kuyumcukent after the taxes were introduced. Suggesting that such investors should be granted Turkish citizenship in return for some $2 billion in investments, Güner underlined that promotional activities should be initiated to attract more Dubai jewelry dealers to Istanbul. The Dubai Gold and Jewelry Group, the equivalent of the Turkish Jewelry Exporters' Association, has asked for an appointment to hold talks in Turkey. The Turkish association will lay out the advantages of investing in Turkey in talks, considering that the Dubai jewelry sector will face challenges in the wholesale trade due to taxes.
The reason why Dubai has brought up taxation is the pressure from surrounding Arab countries, especially Saudi Arabia. While the countries in the region have applied a 5 percent tax and 5 percent VAT, Dubai has not implemented such taxes for many years to maintain its central position, drawing reactions from neighboring countries. In addition to allegations about unfair competition, consumers from other Arab countries were buying jewelry from Dubai and bringing it to their countries without paying tax. Dubai, unable to resist the pressures, decided to levy the new taxes.
Stressing that this is a great opportunity for Turkey, Güner said that a very high amount of gold jewelry enters Dubai. Making a comparison between Istanbul and Dubai, Güner said Istanbul should make good use of the 2-kilometer Kalpakçılar Caddesi, a street in the Grand Bazaar full of jewelry and gold shops and the heart of the Turkish gold market, as it is located in a wider area than its equivalent in Dubai. Touching on the fact that vehicles can come to only two out of the 17 doors of the Grand Bazaar, Güner suggested that the surroundings of the bazaar must be closed to traffic to enable more vehicles to ship more gold to stores operating in the bazaar.