Prices on the Rise? New Tax Policy May Make Chinese E-Commerce Sites Pricier

Late last week I wrote about how e-commerce sites in China evade taxation by not providing official invoices (which can only be purchased from the government and are thus a form of taxation) to consumers. One NPC rep has estimated that this adds up to billions in lost taxes, and yesterday, China’s tax authorities published a new policy titled Internet Invoice Management Methods that will require all e-commerce sites to provide customers with official invoices for their purchases. The new policy goes into effect on April 1 (but no, it’s not an April Fool’s joke).

The new policy isn’t likely to have a big effect on purchases directly from major B2C e-commerce sites, as many of those sites already provide their customers with official invoices. But it could lead to price raises on C2C sites like Taobao, where many individual shop owners who previously hadn’t bothered with official invoices will now be required by law to provide them. One shop owner told China Radio Network that the policy was likely to raise the cost of infant diapers sold through an e-commerce platform by as much as 20 RMB ($3).

Of course, as with many such policies, the question will be whether or not it is strictly implemented or enforced. Chinese tax authorities have already said that they do not intend to tax the country’s e-commerce industry to death and wish to facilitate its healthy development, so we may see a somewhat hands-off approach taken when it comes to actually forcing online shopkeeps to provide official invoices. On the other hand, with billions at stake, tax authorities may be content to damage the C2C e-commerce industry since they know the B2C sites aren’t likely to be strongly affected. We’ll have to wait until April to see whether or not the new plan will really make C2C sites like Taobao pricier.

(China Radio Net via Sina Tech)