Brilliant Business On The Black (And Gray) Market for Gold Anarchy On The Jewellery Market

• 75% of the jewellery market is not taxed

• State collects only 500,000 EUR from excises, but loses over 100 million EUR to tax fraudsters

• Jewellers want excises cancelled and guilds set up, according to Western model

• The last structured qualification of the workforce too place in the 1940s.

Three quarters of Romania"s jewellery market is not taxed, the State losing over 100 million EUR per year because of growing tax evasion. Excises on jewellery only fed 500,000 EUR to the State budget. This would be the abbreviated status report that jewellery business associations have presented. Nevertheless, the fact is that the market volume is one ton of gold jewellery per month, sold for an average of 100 lei per gram. Who is responsible for this?

"The authorities, who have done nothing to get rid of this pest," said Karl Heinz, President of the Romanian Jewellers" Organization (OPBR). According to him, the weight of the black and gray markets within the total market is growing continuously, as authorities only audit jewellers who operate legally. "The audits are very severe, the fines are high and the auditors are excessively zealous, especially if they don"t receive a little something," Heinz added. "In the meantime, travelling jewellery vendors go door-to-door, also within their institutions, and sell gold jewellery, even with payment in instalments," Heinz added.

In his opinion, the black market for jewellery is very well organized and its supplied mainly from Turkey. "The merchandise is delivered straight to the destination, and the vendor only needs to distribute it through all the State institutions, ministries, including the Finance Ministry, and all the larger companies or just any place where influential people congregate," Heinz stated.

According to him, the State budget is losing money primarily because of excessive taxation: 15% excise plus 19% VAT. The OPBR did ask for the cancellation of excises on gold jewellery, but the authorities refused. In fact, authorities are even considering raisin the taxes on jewellery, if the VAT for foodstuff is lowered to 5%. At the moment, the Senate has passed two draft laws that would reduce VAT for foodstuff from 19% to 5% and increase taxation on luxury products at the same time. The Chamber of Deputies is now expected to vote on the two drafts.

"Politicians with responsibilities in this field agree with our initiative to ask for the cancellation of excises on gold jewellery, but say there is no political will," Heinz added. Since tax fraud is also impacting the natural development of the industry, legal sales have been decreasing. Concurrently, "the weight of the black market, where the customer is cheated and the State defrauded will increase in the near future," Karl Heinz believes.

The cherry on this cake is the global economic and financial crisis, as this industry, too, has been impacted severely. According to the jewellers, sales have been smaller than in 2007, as the purchasing power and spending have been decreasing. "The international crisis could have negative effects especially on the workforce and therefore on the jewellery market," OPBR said.

As for human resources, Kall Heinz emphasized that the industry was confronting a drastic shortage of qualified workforce because the last structured qualification took place almost six decades ago. A solution would be to set up guilds, which, according to OPBR, would be the only ones capable of organizing and managing competitive qualifications countrywide.

This subject is also problematic, because politicians have been stalling the law that would allow the establishment of guilds, Heinz said. The initiative was supported by the largest guild in Germany, the one in Koblenz, which had been supporting Romanian counterparts for seven years. Eventually, tired of Romania"s unreliability, the German guild terminated their support, so Romania is the only country in the region without jewellers" guilds and without a chance to benefit from the German know-how.

Heinz exemplified saying that the guilds in various German industry generated some 60% of the GDP and ensured 75% of the workforce qualification, being "an important pillar in the society"s hierarchy of values." "Apparently, our politicians are not interested in this subject," Heinz concluded.