Illegal jade trade still thriving despite mining suspension

Myanmar jade is still being smuggled across the border to China in large quantities despite the government having suspended new licences for two years now, U Zaw Bo Khant, vice chair of the Myanmar Gems and Jewellery Entrepreneurs Association said at a gems forum last week.

That implies the existence of a large and illegal jade industry which the authorities are currently ill-equipped to control. It also points towards a lack of transparency in official available data.

Since May 2016, renewals of expired licences for mining jade and gemstones have been put on hold and lists of the areas where mining can no longer take place have been updated and released by the Ministry of Natural Resources and Environmental Conservation (MONREC) on a monthly basis.

Thousands of licenses have expired since then, with the remaining active blocks expiring by next year. “Despite the halt in mining operations, which means that production should fall, jade is still being exported to China. This is resulting in a great loss for our country,” said U Zaw Bo Khant. Chief among the reasons for this is high taxes on the sale of jade through official channels.

High taxes

Sales were better back under the 1995 Gems Law, under which taxes amounted to just 10 percent with no other fees involved, U Zaw Bo Khant said. “Nobody wants to illegally export gems. People want to sell at expos or emporiums as they can earn more from auctions instead of paying a fixed price. Business was good back then,” he said.

In recent years though, taxes on gems and jade have increased. With a special goods tax of 15pc and jewellery tax of 3pc, tax rates are now around 18pc, and that’s excluding other fees. As a result, traders are bypassing the expos for unofficial routes.

With fewer sales, revenue from the government’s annual jade and gems emporiums in Nay Pyi Taw has dwindled. From over billions of euros in 2010 and 2011, total sales have fallen between €300 million and €500 million since 2013 and that has seen tax revenue take a beating.

“Instead of increasing, tax revenues have decreased as a result of the higher tax rates. Policy makers shouldn’t just look at the short term,” U Zaw Bo Khant said.

Avenues lacking

The other reason illegal trade is still thriving is the lack of legal avenues, such as expos and auction houses, through which Myanmar traders can sell jade. This has led many miners hard up for cash to cover excavation fees to trade illegally with China instead, he said.

According to a report on creating transparency in natural resource extracting businesses by the Extractive Industries Transparency Initiative, Myanmar raked in more than US$1.1 billion from jade and gem sales in 2014-15 but this had declined by over 25pc to US$848 million the following year. However, Global Witness in 2015 estimated that the value of official jade production in 2014 alone was well over the US$12 billion as indicated by Chinese import data, and appears likely to have been as much as US$31 billion.

Although the figure equals to nearly half of Myanmar’s official GDP and 46 times government expenditure on health, only a handful of people are enjoying incomes from the jade and gemstones sector. These businesses use various ways like under-valuation, tax evasion and bribery to bypass taxes, the Global Witness report said.

The reasons behind illicit jade smuggling include being unable to control the production and to know exactly the production rate in tonnes, said Kachin State Natural Resources and Environmental Conservation Minister U Dar Shilar Saing.

Despite China’s attempts to control Myanmar agricultural imports, no controls have yet been meted out on the entry of illegal jade from Myanmar.

Source: Myanmar Times

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