According to officials, the tax loopholes facilitated unfair competition between Chinese marketplaces and other industry players.
The South African Revenue Service (Sars) has announced interim tax changes that will impact e-commerce players like Shein and Temu from 1 September 2024.
It will charge VAT on top of the flat 20% duty these importers currently pay. Further, permanent changes will follow in November.
The announcement comes after Sars delayed the implementation of a 45% plus VAT import duty to address companies like Shein and Temu undercutting local clothing retailer prices.
“The South African Revenue Service remains committed to providing clarity and certainty in the implementation of its mandate of promoting legitimate trade for the economic development of the country in an era of rapidly expanding e-commerce,”
Sars said in a statement on Friday, 9 August 2024. “This will be achieved by making it simple and easy to facilitate an increased movement of goods.”
Sars noted “legitimate concerns” expressed regarding the import of several goods, mainly clothing, via e-commerce.
“A number of importers have not been paying the obligatory customs duties and VAT on these imports, resulting in unfair competition with other industry players,”
said Sars.
It acknowledged that the issues stem from a Sars customs concession for packages valued at less than R500, where importers paid a flat rate of 20% instead of customs duties and tax.
To address the issues, Sars is making several changes that are aligned with the World Customs Organisation (WCO) framework.
In early 1990, the WCO developed a set of release/clearance procedures known as the “WCO Guidelines on Immediate Release”.
Sars commissioner Edward Kieswetter said the organisation will work with the Department of Trade, Industry, and Competition, and other industry players to build public trust by identifying opportunities to protect local industries and businesses.
He said Sars will turn to “the greater use of data, artificial intelligence, machine learning and algorithms to better facilitate trade while minimising risks to the economy”.
Kieswetter recently revealed that tax loopholes exploited by international e-commerce players had resulted in fiscal losses of approximately R3.5 billion ($191 million).
He said Sars is clamping down on these unfair advantages as it catches up on updating tax rules and administration services. He added that South Africa’s tax rules and administration processes aren’t geared for the era of online shopping. When they were first developed, “it was a couple of people buying from Amazon.com and Alibaba ,” said Kieswetter.
Kieswetter said shopping habits have shifted since, and Sars needs to modernise its processes.
Source: Mybroadband
