The Great Tax Heist: How SARS is Selling Out Local Businesses to Chinese E-Tailers
As the South African Revenue Service (SARS) continues to delay the implementation of higher import taxes on small clothing items bought from international online retailers, the e-commerce and clothing retail sectors are left reeling. Local businesses are struggling to compete with Chinese e-tailers like Temu and Shein, who are exploiting tax loopholes to undercut prices and snatch market share.
In a shocking admission, SARS has revealed that it has not yet set a date for imposing the 45% tariffs, plus VAT, on small clothing imports. This means that Chinese e-tailers will continue to flood the market with cheap, low-quality goods, destroying the livelihoods of local entrepreneurs.
"This is a slap in the face to our industry," says Alastair Tempest, CEO of Ecommerce Forum South Africa (EFSA). "We have members who have lost over 20% in sales since January. In a market where profit margins are very tight, SA businesses are being forced to lay off staff. There is an inevitable ripple effect throughout the e-commerce chain – from the merchants themselves, to the logistics/delivery, the payment services, the warehousing, etc."
Tempest believes that SARS is effectively supporting global e-commerce businesses that are rivals to local counterparts. "SARS is not talking to anyone in any constructive manner, and they are certainly not talking to our industry that is paying tens of billions of rands in taxes every year."
Meanwhile, the National Clothing Retail Federation (NCRF) is calling for SARS to take immediate action to level the playing field. "This has been going on for several years, it’s not just now. And once the customer is gone, retailers lose the customer into the future. Competition is going to happen in a number of different ways and we are not against competition, because it’s good for the entire value chain," says Michael Lawrence, executive director of the NCRF.
"But we believe the consumer is entitled to protection and offshore players must subscribe to the consumer protection laws. The consumer should know how the fabric is manufactured and the working conditions of those factories where goods are manufactured."
The delay in implementing the tariffs is a clear example of SARS’s failure to protect local businesses and create a level playing field. As the situation continues to unfold, one thing is clear: the future of SA’s e-commerce and clothing retail sectors hangs in the balance.
Who’s to Blame?
SARS: For its failure to implement the tariffs and protect local businesses.
Chinese E-Tailers: For exploiting tax loopholes and undercutting prices to snatch market share.
Local Businesses: For being left to struggle in a market that is heavily tilted in favor of foreign competitors.
Consumers: For being sold cheap, low-quality goods that are detrimental to the environment and the economy.
The Solution?
Implement the tariffs and VAT on small clothing imports to level the playing field and protect local businesses.
Require Chinese e-tailers to register with the Companies and Intellectual Property Commission (CIPC) and pay VAT, just like local companies.
Invest in infrastructure and IT systems to improve the efficiency of tax collection and enforcement.
Educate consumers about the importance of buying locally made products and the benefits of supporting local businesses.
The Bottom Line
The delay in implementing the tariffs is a clear example of SARS’s failure to protect local businesses and create a level playing field. It’s time for SARS to take action and for consumers to support local businesses. The future of SA’s e-commerce and clothing retail sectors depends on it.
