Previously, diamond companies were able to get away with paying relatively little tax on their profits by creating a smoke-screen around how many diamonds they had in stock.
This changed when the Federal Government introduced the Karat Tax and tax revenue from the diamond industry has increased as turnover figures are much more difficult to manipulate that profit figures.
De Tijd writes that tax revenue from the diamond industry has increased three-fold since the changes came into force.
However, the Karat Tax has had an interesting side effect.
Since it came into force diamond companies’ profits have increased twelvefold. These profits have no doubt always existed. However, now it is no longer worth trying to conceal them in tax havens such as Dubai.
The industry withheld the profits from its books to achieve tax optimisation, something that of course is not illegal.