A Wuhan-based online store selling female attire on China’s largest auction site recently paid more than 4.3 million yuan ($660,000) in taxes to the authorities, the first time a local government has levied tax on a private online business in China, the Wuhan Local Taxation Bureau said on Tuesday.
The My One Percent store on taobao.com has made more than 2 million online deals since it opened in 2004, with revenues topping 100 million yuan last year, according to the bureau.
Analysts say that Wuhan’s decision may drive away locally based online businesses and hurt employment, but the authorities said they are currently only targeting stores using Golden Crown – a credit system that indicates a store’s sales volume and reputation – and others would not be affected, Hubei-based Chutian Metropolis Daily reported .
The State Administration for Industry and Commerce issued a regulation last year requiring online businesses to register real names and addresses on websites, which at the time was widely seen as a prelude to taxation.
“This is just a beginning. We will supervise other online stores registered under our jurisdiction,” said an official from the bureau surnamed Wu, who declined to give his full name.
The online transaction volume in China reached 498 billion yuan in 2010, accounting for 3.2 percent of the total volume of retail sales.
“However, E-commerce in China hasn’t become big enough to be taxed. It’s still like a piglet and needs years to become mature,” said Li Yi, secretary general of the Mobile Internet Industry Alliance to the Global Times.
Instead of taxing them, local governments should create more favorable policies and lower the threshold for online storeowners, he said.
Wang Qiduan, another owner of a popular online store, said the only advantage online storeowners currently have is that they don’t need to pay rent.
“The environment for opening an online store has become tougher than before. I need to pay Taobao monthly to be listed, and now we may get taxed in the future,” Wang added.