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Alibaba

Online bargains from China set to cost more for Australia residents with new tax

Australia will levy a 10 per cent goods and services tax from next July on imported items costing less than A$1,000, with Chinese e-commerce platforms likely to see the biggest impact

PUBLISHED : Thursday, 23 November, 2017, 9:32pm
UPDATED : Friday, 24 November, 2017, 10:05pm

Chinese e-commerce platforms could be among the most affected by an Australian government decision to impose a 10 per cent goods and services tax on low-priced products bought online from overseas merchants.

Currently goods imported from overseas that are priced below A$1,000 (US$760) are exempt from GST, but from July 1, 2018, Australian residents will have to pay an extra 10 per cent for most types of products, regardless of their value.

The new rule aims to bring about fair competition for Australian merchants, who have been hit by cheaper imports on which duty is not paid, said Kate Roff, an Australian tax official who is in Shenzhen as part of a roadshow to explain the policy. An extra A$300 million is estimated to flow into the government’s coffers in the first three years of the policy, she said.

China will be among the biggest countries to be hit, with an estimated over 500 online platforms, merchandisers and shipping companies potentially affected, followed by Singapore, Japan and Malaysia, according to Australian government figures.

For Zhu Renxin, a director of a Foshan, China-based trading company that sells bags worldwide through global e-commerce platforms including Amazon and eBay, the new rule could mean that he would have to put up prices for shoppers in Australia by more than 10 per cent because of other costs associated with the change.

“We will have to hire professional tax consultants to help us deal with the local Australian tax rules, and probably some other related disbursements, which will also be added to the prices that local consumers will eventually have to pay,” Zhu said.

“Also, dealing with e-commerce platforms is not easy for us merchants, and we are still confused as to who will actually collect the GST from consumers,” he said. Zhu’s company sells bags at around US$45 each, although Australia is not a key market, he said.

Under the new regulation, e-commerce platform operators and merchants will be required to register with the Australian tax bureau and levy the 10 per cent GST, as long as their annual turnover exceeds the A$75,000 threshold. They would also need to decide between them how to actually collect the tax.

Alibaba Group Holding, the operator of AliExpress.com, an online retail service made up of small businesses that sell goods overseas, said it was studying the rule change.

“Alibaba Group remains committed to complying with the applicable laws and regulations in the markets in which we operate,” it said in a statement. “We are currently reviewing the newly announced amendment on the goods and services tax to determine how this may be implemented.”

Alibaba owns the South China Morning Post.

JD.com, the second-largest e-commerce player in China, did not immediately reply to a query about the new rule.

Australian company Transtar International Freight, whose business includes collecting packages from various parts of China and shipping them to Australia and elsewhere, expects the cost of buying goods overseas to rise sharply for Australian residents after July 1, as companies will have the added responsibility of collecting the tax and filing the related paperwork.

“Most of our clients in Australia are Chinese, and they are already accustomed to placing orders in China and having us ship them to Australia for a competitive price,” said Vista Wang, a Shenzhen-based manager for the company.

That may not go down well with people like Zhao Xiaoyan, a 34-year-old from the northwestern Chinese city of Xian, who has lived in Melbourne for six years.

“I bought clothes from [Alibaba’s] Taobao when I first I arrived in Australia, but I find the shipping costs high so I do not think I will buy clothes online if I now have to pay additional taxes,” she said.