That’s according to a report Sunday (Jan. 4) by the Financial Times (FT), which also noted the pressure the country’s new tax is placing on merchants.
Following the adoption of a new law last year, companies like Amazon, Shein and Alibaba have been turning over data about merchants’ profits, the report said, citing documents released by local tax bureaus.
The FT added that upwards of 7,000 eCommerce platforms had reported tax-related information by the end of the third quarter, Lian Qifeng, a director of tax for the State Taxation Administration, said during a briefing last month.
This has helped drive a 12.7% increase in tax revenues from eCommerce platforms during the third quarter of the year from 2024, at a time when China is seeking new revenue sources in the face of slowing economic growth, the report said.
“Data-driven taxation has become the ultimate weapon in the authorities’ toolbox,” said Quan Kaiming, Shanghai-based partner at Allbright Law Offices, who added that the new rules promote fair competition but also increase compliance costs and data security risks.
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For sellers dealing with thin margins, the FT said, a higher value added tax — 13% for companies with sales above 5 million yuan — could be crippling.
“This will kill us, everyone. We were not paying any tax before and that’s the biggest benefit of selling online,” said a Quanzhou-based Amazon exporter identified by the FT as Huang.
“Profit margins on Amazon for sellers average around 8%, and rarely does anyone exceed 20%,” Huang told the FT. “It is not reasonable at all for cross-border merchants like us to pay a tax as high as 13%.”
In other eCommerce news, PYMNTS wrote last week about the “massive operational burden” that returns place on retailers this time of year.
Findings from the National Retail Federation (NRF), in conjunction with Happy Returns, projected that retail returns in the United States will reach $849.9 billion in 2025, accounting for about 15.8% of total retail sales.
“Online purchases drive a disproportionate share of that volume, with the NRF estimating that 19.3% of eCommerce sales will be returned,” the report added.
“While the overall return rate is slightly below 2024 levels, the absolute dollar figure remains close to a trillion-dollar problem, one that increasingly lands on retailers’ balance sheets rather than being absorbed as a cost of growth.”
Holiday sales exacerbate the pressure. The NRF forecast that U.S. holiday retail sales will exceed $1 trillion for the first time, while the survey shows that retailers anticipate that around 17% of holiday purchases will be returned.
