Israel Seeks to Revive Diamond Sector With Tax Breaks Amid Global Slump

Dubai has emerged as a dominant force in the global diamond trade, concluding 2025 with a record $41.8 billion in diamond sales, a 17% increase year-over-year. This surge contrasts sharply with traditional diamond hubs like Antwerp, Belgium, which saw its trade fall 23% to $19 billion, and Israel, once a major player in diamond polishing and trading. Israel's net polished diamond exports for the first half of 2026 were $625 million, a 21% decrease from the previous year.

In response to this decline, the Israel Tax Authority and the Diamond Exchange in Ramat Gan have agreed on a new tax arrangement. Starting in 2027, diamond traders can opt for a system where taxable income is calculated based on an agreed percentage of turnover, rather than annual profit assessments. This measure, valid for 2027 and 2028, also eliminates the minimum income requirement that burdened traders during slower periods. The objective is to attract diamond companies back to Israel, boost trading volumes, and revitalize activity around the Ramat Gan exchange.

However, these incentives are being introduced as the global diamond industry faces significant challenges. The rise of lab-grown diamonds is dramatically impacting the natural diamond market. In 2025, 62% of engagement rings purchased in the U.S. featured a lab-grown diamond as the central stone, a stark increase from approximately 18% in 2020, primarily due to their significantly lower cost. This trend has led to price reductions across the supply chain, affecting traders, polishers, and mining companies.

Major industry players are feeling the strain. De Beers, a prominent natural diamond company, saw its revenue drop from $1.95 billion to $1.58 billion in the first half of the year, with average rough diamond prices falling 32%. Its parent company, Anglo American, has written down over $5 billion in value from its investment in De Beers and is seeking to divest its stake. Mining operations are also scaling back, with De Beers reducing its 2026 production forecast and considering suspending operations in South Africa.

Dubai's success is attributed to its strategic location, investment in infrastructure, favorable trade policies, and its role in channeling trade, including that of Russian diamonds affected by sanctions. The emirate is also expanding into the lab-grown diamond market, processing 77 million carats in 2025. Belgium is attempting to adapt by easing entry for foreign traders and improving trading conditions, showing a modest increase in trade volume in early 2026. India continues to dominate diamond polishing, processing over 90% of the world's polished diamonds, though it faces challenges from reduced U.S. demand.