China's E-Commerce Tax Remains A Distant Prospect

Mary Swire, Tax-news.com, Hong Kong

07 February 2001

Early last year the Chinese government said the taxation of e-commerce was inevitable and it should be treated the same way as traditional physical businesses in China. Last July director of the State Administration of Taxation (SAT), Jin Renqing, went on the record saying: 'If I were to attend an international conference on e-commerce, as the tax minister of a developing country, I'm afraid I would have to disagree with a tax exemption for e-commerce.'

However, as much as the government would like to see an e-commerce tax in place it has been forced to admit that the complex nature of such a controversial measure has thrown some difficult obstacles in its path.

Last week, Chinese officials charged with working on the e-commerce tax proposals confirmed that they are unable to even guess when the tax would be implemented. Li Xinyuan, spokesperson for the SAT, said: 'We have no timetable yet for when we can impose the tax. We are facing many problems and we need to work on them.' The government is reluctant to reveal any plans agreed so far and refuses to speculate how high the tax will be.

There has been some speculation in the Chinese media that the tax will be on the high side, since the government is eager to explore new ways of collecting revenue with state coffers running dangerously low last year. But although the number of Chinese Internet users is increasing, online transactions in China are extremely low. According to a government survey, online sales in China in 1999 were valued at US$6.6m, which is less than 0.02 per cent of the country's total consumption, compared with 1.4 per cent in the United States. The government is clearly in the difficult position of desperately needing the revenue whilst trying not to tax too high so as to deter new users from buying online.

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