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RAPAPORT... Some 18 Antwerp-based diamantaires have launched a lawsuit against Belgium’s Intern Compensation Fund for a newly introduced taxation scheme designed to reimburse the social benefits for workers of diamond manufacturers.
According to a letter sent by the Belgium Polished Diamond Dealers Association (BVGD) to its members, the industry is claiming the fund collected about EUR 4.7 million in 2007 but spent only EUR 1.7 million.
BVGD noted that the extra EUR 3 million was “uselessly siphoned from the market to be frozen in an unproductive bank account,” which had been intended for the diamond trade.
BVGD president Andre Gumuchdjian explained that the fund was not supposed to accumulate funds above EUR 800,000 and that the individual diamantaires were suing to get their money back.
“That the whole scheme of taxing all companies for the benefits of a few is wrong, economically unjustified and unsound,” he said.
Companies with a turnover of less than EUR 5 million are exempt from the fee leaving about 40 percent of diamantaires who are required to contribute. At the same time, Gumuchdjian explained, less than 4 percent of companies qualify to receive money as the fund only pays to businesses which employ diamond cutters or polishers.
The Intern Compensation Fund was first launched in 2001 to pay for the social benefits of workers in the diamond industry whereby diamantaires would contribute 0.08 percent of their turnover to the fund. The tax was cancelled a year later but the “social plan” was reintroduced in July 2007 as a 0.03 percent charge on turnover.
“The social plan is uncovered for what it really is: A taxation of diamond companies that has no economic justification whatsoever,” BVGD said in the letter. “This hurts the business climate and the future of Antwerp.”
BVGD stressed that it is not part a party to the lawsuit but is supportive of the action.
While the charge has since been lowered to 0.005 percent of total turnover, Gumuchdjian said the claimants were seeking compensation for payments already made into the fund, and that their action was a protest to the lack of transparency by which the fund was introduced - having been negotiated by representatives of just two major companies in the local industry.
“The protocol of understanding had some good points,” Gumuchdjian said. “But it was negotiated in secret and there were some serious discrepancies between the agreement we saw and the legislation that was passed.”
Among these omitted points was an agreement that the tax would be scrapped should the level of employment in the Belgium diamond industry halve, which Gumuchdjian said was already a reality with the closure of three major cutting works in Antwerp.
In addition, when the tax was introduced, the Belgium government suspended its import taxes on rough diamonds for a three year period with the understanding that the suspension would be renewed, but the industry is looking for a guarantee on this point and for the “social plan” to be scrapped altogether.
“In order for Antwerp to be dynamic and prosperous, those illegal and unjustified practices have to stop. The social plan should be scrapped without delay,” BVGD said. “The BVGD is ready to examine with our colleagues from the industry their needs and resources as well as better methods for encouraging diamond manufacturing in Antwerp using market-efficient techniques that do not hurt the diamond trade and the business environment of Antwerp.”
BVGD did not disclose the total value of the lawsuit.
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