“The only thing certain in life are death and taxes,” this famous quote by Benjamin Franklin may soon be proved even more as Chinese Officials have recently stated that a tax on China’s insanely profitable Ecommerce market may soon be on the horizon. China’s Ecommerce market is estimated to be worth over 212 billion dollars and it would appear the Chinese Government can no longer ignore the lure that is taxing this relatively new market.
This extremely controversial issue was brought to light after Suning Appliance CO Ltd., China’s largest electronic store, requested an online tax proposal to Chinese Authorities. Suning approached Chinese Authorities because of the fact that online stores have lower overhead costs, causing unfair competition between them and physical stores. Another reason brought up for the tax is the fact that China’s Ecommerce is growing so fast it simply can no longer be ignored by the Chinese Government. Now, there is no question that most western countries would have begun taxing this market long ago, but is it a good idea for China to follow in their footsteps?
A tax would help eliminate unfair tax burdens as well as prevent many businesses from using online sites to avoid tax obligations. Although this tax would have its obvious benefits, some experts argue of the negatives that could follow such government involvement. For example, over 95% of online vendors claim a monthly income of only about 20 thousand Yuan. This means most online stores are not huge corporations, but small family businesses that only sell a limited number of products a month.
A tax on businesses such as this would only hurt their already small profits and cause would impair their ability to create and save jobs. The Chinese people are also very thrifty shoppers and have migrated to online shopping because of its low cost. However, a tax on Ecommerce would cause online shopping to be more comparable to physical stores and would lessen the pull of shopping for merchandise online.