Due to the latest events in Ukraine, almost all the jewellery stores were urgently shut down in the centre of Kiev. During the Baselworld Fair, executives of many global jewellery brands expressed their great concerns about their partners in Ukraine and told that they had almost completely stopped their trade there and moved their jewellery to their partners’ showrooms and stores in Europe or just hidden in a safe place till things would go better.
A grim picture of Kiev disturbs each and every businessman and raises a simple question: What will be in future when the situation is normalized? Shops, banks, cafes and restaurants are shut down, battened or protected with burglar bars.
Moreover, the Ministry of Finance of Ukraine has prepared a draft law on cancelling the simplified taxation for small- and mid-scale businesses. According to the experts’ estimate, the jewellery industry only can lose 90 percent of its players. Under the new law, operations with jewellery will be allowed exclusively within the framework of the common taxation system and the jewellers should purchase special cash registers and integrate them into the online system of the state taxing authority.
“The economy is under stagnation, the population income level is falling, the jewellery consumption declines. Against this backdrop, the introduction of the general taxation system without due consideration of the consequences, arguments and public discussions is a discrimination move for hundreds of thousands of Ukrainians involved in this sphere. Jewellery craftsmen are not Jacks-of-all-trades and cannot work in other industries with due skill. In 2011-2012, there were attempts to drive small and mid-scale business out of the industry, throw their people out of work, and it was the consolidation of all the jewellers and deputies that made it possible to stop this process,” Ukrainian jewelers say in their official address.
The jewelers also note that the total tax burden in the industry (with account of the fee to the Pension Fund) is about 12 percent of the revenue, which is the highest among other businesses working in the simplified tax system. In this case, the profitability steadily declines due to the increased raw materials cost: it reaches only 15 to 20 percent, according to Interfax-Ukraine.
The Kiev Jewellery Factory, a major jewellery manufacturer in Ukraine, has been facing huge financial problems for a year and started layoffs. Although, it was this factory that manufactured state awards of the independent Ukraine, including the ‘President of Ukraine’s Award of Honour’, Star of the Order of ’Knyaz Yaroslav the Wise’, ‘Star for Courage’, Star of the ‘Order of Merit’, and Order of ‘Bogdan Khmelnitsky’. And in 1995, the factory got the ‘Torch of Birmingham,’ an international award in recognition of its success in economic survival and development in the face of adverse conditions. More than once, the Ukrainian jewelers won international prizes and diplomas.
How soon will the jewellery business in Ukraine become profitable again? The optimism of the jewellery units has not faded completely and some outlet stores in the remote areas of Kiev keep on working as usual. Let’s hope that the jewellery industry in Ukraine will not vanish and it will be able to overcome this difficult period.
Veronica Novoselova, Rough&Polished
