Premature tax hike could hurt Chinese consumer spending
You may call it a move for fairer taxation. Youmay call it a move to facilitate trade. But you cannot sell it as a boon for Chinese consumers, because once the tax rules on online retail goods are changed on April 8, Chinese online shoppers will feel the impact and are likely to think twice about opening their purse strings.
Hence, Chinese policymakers, who are anxious to ensure tax revenues grow fast enough to help cushion the country’s economic slowdown, should be cautioned that raising tax on consumers may prove a Pyrrhic victory.
TheMinistry of Finance announced on March 24 that retail goods purchased online will no longer be classified as “parcels” and enjoy a “parcel tax” rate that is lower than that on other imported goods. Instead, online purchases from overseas will be charged the same as any other imported goods.
Currently, the country levies parcel tax on imported goods worth less than 1,000 yuan ($150), and the rate can be as low as 10 percent. Taxes under 50 yuan are generally waived. As a result, many online purchasing agents have sought to avoid paying higher taxes by repackaging and mailing products separately so they will only be charged the parcel tax, undercutting traditional retailers and importers who have to bear a heavier tax burden on their goods.