SARS Postpones New Tariff That Affects Temu and Shein Shoppers in South Africa

In a significant announcement for the South African online retail market, the South African Revenue Service (SARS) has temporarily put off implementing a potentially market-shifting tariff on imported clothing products. This move comes as a reprieve for the large customer base of international eCommerce platforms Temu and Shein, which have sharply risen in popularity in the country.

SARS's decision follows feedback from the South African International eCommerce Association (SAIEA) which highlighted the need for additional stakeholder engagement prior to the enforcement of the new tariffs. These tariffs were initially considered a means to level the playing field for local retailers, who have long argued that their foreign counterparts have an unfair advantage due to lower import duties.

The contention centers around the fact that orders valued under R500 (approximately $34) currently attract a modest 20% tax, without Value Added Tax (VAT). Retailers believe that Temu and Shein exploit this rule by breaking up larger orders into smaller shipments. This way, they initially benefit from the lower tax rate only to recombine them later for final delivery to customers.

Jean-Louis Nel, tax director at Van Huyssteens Commercial Attorneys, illuminated this practice, which is based on the ‘de minimis’ rule allowing for a lower tariff band. The frustration for local retailers is palpable as any imports they handle are subject to a 45% plus 15% VAT. This significant difference has implications for pricing and, by extension, the competitiveness of South African businesses.

Amidst the burgeoning realm of online shopping, SARS Commissioner Edward Kieswetter has acknowledged the necessity for SARS to update its processes, which historically catered to a pre-eCommerce market landscape. With online shopping habits growing and evolving, the tax authority recognizes the importance of modernizing to stay relevant and fair.

The decision to delay the increased tariff is perceived as stepping back to ensure readiness among stakeholders and the trade systems supporting the burgeoning eCommerce sector in South Africa. Dudley Filippa from the SAIEA has expressed support for the changes while emphasizing the need for robust systems capable of handling the new tax implementation process effectively.

Garry Marshall from the South African Express Parcel Association (SAEPA) has presented a different perspective on the implications of changes in tax policy. He raises concerns about potential job losses in the courier industry as a result of reduced import volumes, thereby affecting the livelihoods of thousands employed in the sector.

Despite differing views, what remains evident is the desire for an equitable trading environment where local entities can compete fairly with international giants. Local online giant Takealot, among others, has been vocal in calling for such equality, spotlighting the need for offshore platforms to contribute to the South African economy just as much as they draw from it.

Business leaders like TFG CEO Anthony Thunström are pushing for fair competition, emphasizing that current disparities in tax rates offer unwarranted advantages to foreign competitors and must be rectified for the health of the nation's economic and employment landscapes.

As shoppers enjoy the status quo and stakeholders brace for future changes, the South African eCommerce saga continues, with developments awaited from SARS's ongoing stakeholder engagement process.