As of July 1, a tax increase for imported products bought from e-commerce stores, Shein and Temu, is set to be implemented, according to the South Africa International Ecommerce Association (SAIEA).
The tax hike is an occurrence after South African Revenue Service (SARS) discontinued the small parcel exemption on imported goods, where local retailers and the textile industry accused Chinese e-commerce companies of exploiting a tax loophole that gave them a competitive advantage. Thus, resulting e-commerce consumers paying low taxes for imported goods via online stores.
The exemption, also known as a “de minimis” is a lifeline for cash-strapped consumers allowing them to purchase clothing and other items from e-commerce platforms at factory cost.
De minimis, the value threshold below which imported goods are exempt from duty and VAT, previously pegged goods below R500 at a 20% tariff, is to be increased to 60% comprising 45% import duty and 15% VAT.
The exemption, promoted by World Customs Organisation (WCO) of which South Africa is a member, is applied across 186 member-countries and aids e-commerce platforms worldwide in low value consignments.
De minimis on e-commerce of other WCO countries such as the USA, less than $800 duty free, while the UK’s less than 135 Pounds duty free, Australia less than AUD$1 000 duty free and China less than RMB 5 000,9.1%.
South African Express Parcel Association (SAEPA) CEO, Garry Marshall lamented e-commerce shoppers are bearing the brunt of unfounded accusations against Shein and Temu regarding evading tax loopholes.
“This is a severe blow to thousands of customers who rely on low-cost clothing for their children and families. The perceived customs exploitation is a direct aspect of Customs/SARS as logistics service providers are Authorised Economic Operator (AEO)-SARS making them fully compliant with all import requirements. There is nothing therefore, to substantiate claims that Shein and Temu are exploiting a SARS loophole since all goods cleared through Authorised Customs Channels,” said Marshall.
“Beyond the negative impact on consumers, we are saddened at the effect this will have on thousands of young South Africans employed as packers, drivers, sorters and clearing staff by our industry.
“In addition, hundreds of independent couriers, who have invested in delivery vehicles would have their livelihoods severely jeopardised. A large number of small and medium enterprises (SMEs) are totally dependent on goods procured in the low-value de minimis space,” added Dudley Filippa, SAIEA Chairperson.
Additionally, a representative from Buffalo International Logistics, a courier company for e-commerce stores, which is also a SAEPA member explained that the company will engage with stakeholders regarding tax tariffs on e-commerce products.
“As members of the AEO programme, we will avail ourselves for the envisaged stakeholder engagements to better understand the new process. Ultimately, we wish to empower South African SMEs with technical skills on how to grow their businesses through the use of e-commerce by trading with countries such as China where there is a great demand for their products. We trust these talks will further allow us to demonstrate the impact of this decision on SMEs, job creation and the thousands of impoverished consumers,” they said.
SARS has indicated it will implement the cancellation in a phased-approach supported by stakeholder engagement to capture learnings and opportunities.
The Star