On Wednesday, NPC representative Wang Tian made a rather shocking accusation: Chinese e-commerce platforms have permitted sellers to evade more than 100 billion RMB ($15 billion) in taxes. And that’s just in the year 2012. In fact, the taxes lost from Alibaba platforms alone add up to more than 35 billion RMB ($5.5 billion), according to Wang.
To be clear, Wang isn’t saying the problem is e-commerce companies themselves — at least not entirely. Rather, he says that an investigation has revealed most sellers on e-commerce platforms don’t provide official invoices to customers along with their purchases. But those invoices, which are printed on special paper and must be purchased from the government, are the primary way the government taxes business transactions like consumer purchases — if sellers aren’t providing them, that means they’re not paying the taxes they should be.
How and to what extent e-commerce sites should be taxed has been a hot topic in China since online shopping became popular, but in part thanks to these numbers, the topic has bubbled to the surface again at this year’s Two Meetings. Chinese lawmakers are considering alternative ways to tax the industry. Song Lan, an assistant director at the State Administration of Taxation, expressed some skepticism about Wang Tian’s sky-high numbers but agreed that the taxation of e-commerce transactions was a serious problem:
E-commerce is a difficult topic we’re researching, because virtualized transactions are pretty difficult to monitor. Additionally, our [transaction] management methods are relatively outdated. So the taxation of e-commerce sites is something we’re researching right now.
The trick, of course, is to extract additional tax dollars from e-commerce platforms without crushing them, and Song Lan has said that the State Administration of Taxation is considering how to tax the industry in a way that promotes its healthy development while not, at the same time, allowing it to shirk its tax obligations.
It’s a difficult balance to strike, and one that authorities aren’t likely to take a crack at before this year’s Two Meetings ends. But the renewed attention could mean that new regulations might be coming sometime later this year. If e-commerce platforms are really resulting in billions in lost tax revenue, you can be sure that tax authorities won’t allow that situation to go on forever.