Dubai’s polished diamond industry is under threat, reminiscent of its historic pearling decline, says Peter Meeus, former head of Antwerp Diamond Bourse, co-founder of the Kimberley Process Certification Scheme and Honorary Chairman of the Dubai Diamond Exchange.
He told Rough & Polished that Dubai now faces challenges that could undermine its position despite leading in the rough diamond trade and logging $13.1 billion in polished diamond deals in 2024.
VAT rules on polished diamonds are inconsistently applied, when compared to rough, unlike the full exemptions available in Belgium and the U.S., putting Dubai at a tax disadvantage. In addition, the advent of corporate tax will only add to operating costs, which are estimated to be 35% higher than in rival markets.
Strict anti-money laundering (AML) rules with unclear fines and no appeals further strain traders. Meanwhile, global firms like PwC seem to be advising both regulators and clients, creating even greater uncertainty.
Meeus points to Dubai’s 2018 tax reversal on gold and rough diamonds as a model.
He urges swift reforms in the forms of VAT alignment, tax breaks, AML clarity, and free zone optimisation before the September 2025 tax deadline.
Meeus said without action, Dubai may lose its $57.5 billion diamond trade, which is already under pressure from companies moving to Belgium.
Below are excerpts from the interview.
What historical parallels exist between Dubai's past dominance in the pearling industry and its current position in the global diamond trade, and what lessons can be drawn to prevent a similar decline in its polished diamond sector?
Dubai once led the global pearling industry, but the rise of cultured pearls ended its dominance almost overnight. The emirate rebounded through oil, trade, and tourism, yet history shows that lost competitive advantage is rarely regained.
Today, Dubai risks a repeat in its polished diamond sector. Despite its leading role in the rough diamond trade, rising taxes, harsh regulations, and high costs could drive traders elsewhere, thereby threatening a sharp decline similar to its pearling past.
Despite Dubai's remarkable rise as a global diamond hub, what specific challenges now threaten its polished diamond business, and how might these impact its long-term competitiveness in the gemstone trade?
Rising taxes, strict regulations, and high costs risk pushing traders out, threatening Dubai’s polished diamond sector. In 2024, the polished diamond trade hit $13.1 billion, part of a $57.5 billion five-year total. With 2023 alone seeing 32% growth to $16.9 billion, polished stones made up nearly half of the UAE’s diamond trade, highlighting their strategic importance.
How does the inconsistent application of VAT reverse-charge mechanisms for polished diamonds impact Dubai's competitiveness in the global diamond trade, particularly when compared to key rivals like Belgium and the U.S.?
The UAE’s reverse-charge VAT applies to rough but not consistently to polished diamonds, weakening Dubai’s global edge, and although a 2025 Cabinet decision aimed to fix this, many see it as too little too late. Combined with corporate taxes, this gap deters the polished diamond trade, unlike Belgium and the U.S., where inter-company trades are fully VAT-exempt.
How do Dubai's current AML regulations and cost disadvantages compare with those of other major diamond trading hubs, and what risks do these factors pose to the emirate's long-term competitiveness in the global diamond trade?
While the UAE deserves credit for strong anti-money laundering efforts, its AML rules are now stricter than in other major hubs. Dubai diamantaires must disclose all transactions above AED 55,000 ($15,000), essentially treating them like banks. Compared to Belgium’s favourable tax regime for diamond traders, Dubai's higher corporate taxes and lack of interest deductions raise costs significantly. Operating expenses are about 35% higher, and shipping fees are 45% more than in Belgium or the U.S. These pressures have already driven some lab-grown diamond firms to relocate, echoing Dubai’s pearling collapse, caused not by competition, but by failure to adapt. Traders are now leaving, and winning them back may be impossible.
How do conflicts of interest among global consulting firms, such as PwC, contribute to regulatory uncertainty in Dubai's polished diamond trade, and what impact does this have on market confidence and business growth?
Global consultancies like PwC play a key role in the crisis, advising the UAE government on tax policies while also helping entities like DMCC navigate those same rules. This represents a clear conflict of interest which has aided in deepening trader uncertainty and stalled decision-making, raising doubts about the value these firms provide in more competitive markets.
What lessons can Dubai apply from its successful 2018 tax reversal for gold and rough diamonds to address the current crisis in its polished diamond sector, and what specific policy changes does the text propose to prevent further erosion of competitiveness?
This isn’t the first time the UAE has faced such pressure. In 2018, the government swiftly reversed taxes on gold and rough diamonds, following a DMCC analysis, reviving both sectors and securing Dubai’s global standing. A similar bold move is now needed for polished diamonds. By consistently applying VAT relief, improving tax incentives, easing AML compliance for legitimate trade, and clarifying rules before the 30 September 2025 deadline, Dubai can avoid costly setbacks. Proactive reforms would also attract high-value business and make better use of its bonded free zones and infrastructure.
Mathew Nyaungwa, Editor-In-Chief, Rough & Polished
