E-stores should be taxed

The Wuhan tax bureau recently requested 430 million Yuan ($66.5 million) from the online store, myonepercent.com, a woman’s clothing store on Taobao.

This is the first case in China of an online shop being taxed, which has aroused heated discussion.

Actually, this is not a sudden move, as early as July 1 last year; the State Administration for Industry and Commerce promulgated the “Network Behavior of Commodity Trading and Related Services Interim Measures,” which were considered a prelude to taxing online shops.

However, many experts in Wuhan believe that imposing taxes will result in lots of big online stores transferring to other cities and some experts have said that as e-commerce is still in an early stage of development the government should support and encourage its growth by exempting taxes.

But one thing must be pointed out: tax is a legal obligation for any company or individual engaged in business transactions.

But you may ask why the Revenue Department is only now starting to impose taxes on online stores. In my opinion, it is not because there is no legal basis for taxation, but rather because it is hard to implement the law.

Why have online stores developed so quickly in China? One of the most important reasons, aside from the fact that the price of goods is much cheaper online than in physical stores, is because there was no tax to pay.

But I think e-stores should pay taxes for a number of reasons.

First, the tax exemption for online stores is unfair to traditional business, a traditional enterprise with annual sales of 1 million Yuan needs to pay variety taxes, while an online store making the same amount of money does not need to pay taxes at all, and this is ridiculous.

Moreover, the tax exemption will hurt e-commerce in the long run. According to China’s business law, only a shop or company that has paid taxes is qualified to receive risk investment. Take myonepercent for example, because it has paid tax, the store was recently able to sign a one-year contract with the venture agency IDG and will receive nearly $10 million dollars of venture capital. A non-taxable personal online shop is ineligible for such investment?

In the end, paying taxes will not hurt e-commerce businesses, because low prices will still be their advantage. But this advantage must be based on logistics, warehousing, labor and other cost savings, rather than based on paying taxes

We do not need to worry about taxing online shops, as the industry will still grow even if they pay taxes. What we need to do now is to consider the characteristics of the Internet, the scale of the industry, the level of individual online shops and devise a comprehensive e-commerce tax system, only in this way will online shopping achieve sustainable development.

Peng Bo is an editor at the April 4th media, write to him at pb.bloomberg@gmail.com

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