VAT has not taken shine off gold-buying sentiment in UAE

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UAE - Despite concerns that value added tax (VAT) will result in shoppers being overly cautious about buying gold jewellery, retailers say that the tax has not had much of an effect on customers' buying sentiment.

Speaking to Khaleej Times at the 44th edition of the MidEast Watch and Jewellery Show in Sharjah, Sajith Kottayan, regional manager of sales at Devji Aurum, said: "I think VAT might have had an impact for sure. However, there are also other parameters as well. There were some reservations about gold purchases, but we see a good recovery for the same last month."

Similarly, Gianpaolo Bruno, trade commissioner to the UAE, Oman and Pakistan at the Italian Trade Agency, said in a phone interview that there was a dip in demand for gold jewellery during the beginning of the year.

"However, we have now seen a pick up again, and this is for a number of reasons," he said. "Firstly, there will always be occasions for people to buy something special for their friends and loved ones. Secondly, this is a market where if you want to buy something, then a small five per cent tax does not make much of a difference in your decision. The only segment that is still careful about spending is the budget segment."

Bruno also noted that there is a period of volatility in the market as gold prices fluctuate. This has also resulted in shoppers being more eager to make their purchases before the gold prices rise up again. "There is a sense that it is better to shop right now and not hold off making any purchases in the future when the prices are high again," he pointed out.

Tamjid Abdullah, board member and deputy chief executive officer of Jawhara Jewellery, also spoke about how jewellers are opting to absorb the cost of VAT to ensure that customers are still comfortable with buying.

"A mere five per cent is not going to have much of an effect on us, and at the same time, it is important for us to ensure that our customers done feel the shock of having to pay extra," he said. Offering his thoughts on the fluctuating gold prices, he said that buying sentiment was not being affected.

"Shoppers will still want to buy for the special people in their lives and for special occasions. Husbands will want to buy something lovely for their wives; children will want to buy something nice for their mothers; and parents will want to buy for their children's weddings," he added.