South African Revenue Service (SARS) is taking firm action to combat tax evasion by international online retailers like Shein and Temu, who have been exploiting tax gaps to provide competitive pricing. SARS is revamping its tax rules and administrative procedures to extract taxes more efficiently from these platforms, and packages will be taxed at 45% plus VAT, the same percentage as local clothing retailers. SARS aims to forge a balanced marketplace for all retailers by plugging these tax gaps and conveying a potent message to online retailers that the era of tax loophole exploitation is coming to an end.
The South African Revenue Service (SARS) is taking bold steps to combat tax evasion by international online retailers. SARS is revamping its tax rules and administrative procedures to extract taxes more efficiently from platforms like Shein and Temu. The new rules mandate that packages from these platforms will be taxed at 45% plus VAT, the same percentage as local clothing retailers. SARS aims to forge a balanced marketplace for all retailers by plugging these tax gaps.
In a resolute move to combat tax evasion by international online retailers, the South African Revenue Service (SARS) is intensifying its efforts. Edward Kieswetter, the SARS Commissioner, has unequivocally stated that such evasion tactics, which have inflicted fiscal damages surpassing R3 billion through the years, will no longer be condoned. This initiative follows escalating criticisms from domestic retailers and labor unions, blaming Chinese platforms like Shein and Temu for exploiting tax gaps to provide competitive pricing.
The core of the problem resides in the obsolete tax collection system. Kieswetter clarified that SARS is currently working on revamping its tax rules and administrative procedures to more efficiently extract taxes from these platforms and their patrons. He noted, “Our current administrative practices were established during a period when e-commerce was not as widespread. With merely a few individuals shopping from sites like Amazon.com or Alibaba, it was a peripheral activity that stayed largely under the radar. We didn’t even levy taxes up to a certain amount.”
Nonetheless, the surge of e-commerce over recent years has been incredibly exceptional. “The world has changed dramatically, and e-commerce has skyrocketed to unparalleled levels. At present, we’re playing catch-up, aiming to modernize our administrative practices and enforce the law,” Kieswetter remarked.
SARS’s commitment to revamp its tax policy became operational on 1 July. The new rules mandate that packages from Shein and Temu will be taxed at the same percentage as local clothing retailers, specifically, 45% plus VAT. Kieswetter did not isolate these platforms, but he emphasized that the enactment of these rules is a required step to counterbalance the ‘unfair advantage’ that online retailers have over brick-and-mortar shops.
“This is not a new law to tax these packages. We’re merely stating that the financial loss to our economy due to prior administrative methods has reached a worrying scale. We calculate it to be around R3.5 billion in lost taxes,” Kieswetter asserted.
The widespread acceptance of these platforms in South Africa cannot be denied. For example, Temu currently ranks as the third most downloaded free app in the country’s Apple App Store. This popularity is precisely what necessitates the current tax restructuring.
SARS’s ultimate objective is to forge a balanced marketplace for all retailers – a praiseworthy step that highlights the significance of equitable taxation. By plugging these tax gaps, SARS is conveying a potent message to online retailers – the era of tax loophole exploitation is coming to an end. In the ever-changing e-commerce landscape, maintaining fiscal responsibility is critical. As the world becomes progressively digital and e-commerce continues to flourish, it falls upon authorities like SARS to adapt, progress, and ensure the fair and proficient taxation of all stakeholders.
SARS is revamping its tax rules and administrative procedures to extract taxes more efficiently from international online retailers like Shein and Temu, who have been exploiting tax gaps to provide competitive pricing.
Packages from these platforms will be taxed at 45% plus VAT, which is the same percentage as local clothing retailers.
SARS is modernizing its administrative practices and enforcing the law to counterbalance the ‘unfair advantage’ that online retailers have over brick-and-mortar shops. This initiative follows escalating criticisms from domestic retailers and labor unions, blaming Chinese platforms like Shein and Temu for exploiting tax gaps to provide competitive pricing.
SARS aims to forge a balanced marketplace for all retailers by plugging these tax gaps and conveying a potent message to online retailers that the era of tax loophole exploitation is coming to an end.
The widespread acceptance of these platforms in South Africa cannot be denied, and their popularity is precisely what necessitates the current tax restructuring. SARS’s ultimate objective is to ensure the fair and proficient taxation of all stakeholders.
Tax evasion by international online retailers has inflicted fiscal damages surpassing R3 billion through the years.
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