China to impose new tax on imported e-commerce

In what can only been as a move by the government to prod Chinese citizens to buy domestic goods, China said it plans to impose new tariffs on cross-border e-commerce that would significantly increase the cost of many items such as food, health care products and low-price cosmetics.

Starting April 8, buyers of all imported goods purchased online must pay most of a 17% value-added tax and a consumption tax, if applicable, according to a policy released March 24 by the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation.

This is up from the “postal articles tax” currently in effect, with rates ranging from the most common 10% to 50%. In addition, goods imported in bulk through other channels will be subjected to an additional tariff.

The new rules will also eliminate a duty-free exemption for goods whose tax payable does not exceed 50 yuan. Packages whose value exceed 2,000 yuan and goods mailed to one person in excess of 20,000 yuan every year will be taxed more heavily as general trade items, according to Chinese news website Caixin Online.

“For cross-border shopping firms that relied solely on differing tax rates under preferential policies for e-commerce, the times ahead will be tough because their business model will collapse if they don’t transform quickly,” Zhang Zhendong, CEO of bolo.me, a cross-border e-retailer told Caixin.

The new policy will increase “the tax burden for items such as mom and baby products, food and health care products,” the international arm of Tmall, the shopping website of e-commerce giant Alibaba Group Holding, told Caixin “Cosmetics and electric appliances, depending on their prices, will see either more or less taxes.”

Tmall said it had been consulted by the government’s policymakers regarding the new rules. Tmall and said they would increase the demand for smuggled goods.

“Low-cost cosmetics, especially those imported from South Korea, each priced under 100 yuan,” will suffer most, Niu Wenyi, partner at a firm that lets Chinese consumers buy goods overseas told Caixin. He said the policy would increase the cost of such cosmetics, which account for a big portion of cross-border e-retails, by more than 30%.

The impact would be huge, too, on mother-and-baby products, food and commodities for everyday use, he said.