By Donald MacKay
Last week a reader, Camilla, who read my TRADE WINDS column in Business Report, “Clearing confusion around taxes on imports from Chinese e-retailers Shein, Temu,” asked how the SA Revenue Service (Sars) would refund her once she paid the import duties on imported clothing from a foreign e-commerce website, if she needed to return some or all of her purchase. This, it turns out, is more difficult to answer than expected.
Let’s begin with first principles. You should only pay import duties and VAT on goods you consume locally. If you return goods to the country of origin, you should be able to claim back the customs duties and VAT.
At present anyone buying small parcels imported through OR Tambo International Airport by courier will pay a flat 20% tax rate. No customs duties or VAT are applied to the product. If you wish to return the product, you are theoretically entitled to get that 20% back on the items you chose to not keep, but this is really difficult because these bulk small parcel imports using couriers are not cleared in the name of the importer.
The courier bulk clears them daily and makes a single payment to Sars once a month. If you return the goods, the courier would probably have to give you the refund, as Sars won’t have you on record as an importer. The problem then is how the courier would get the money back from Sars given that they are not clearing each parcel separately.
If Sars removes the concession which allows the goods to be cleared at 20%, then each item in a parcel would need to be classified separately and the appropriate level of duty applied to each item. For clothing that would be 45%, but for other products it would be different.
Think of a big parcel from Temu, containing clothing, a toy for your cat, a bedside table and plastic storage containers. Each of these attracts a different rate of duty and there are thousands of these parcels moving through OR Tambo International Airport every day.
The systems used by Sars simply don’t allow this sort of detail to be processed for large volumes of small parcels, which is why the concession was created.
I doubt the couriers are equipped for this either. Remember they are also importing parcels, which have nothing to do with clothing and may not even be coming from China.
The World Trade Organisation’s (WTO) Most Favoured Nation (MFN) principle stipulates that WTO members need to offer the same treatment to every trade partner they give to their most favoured nation trading partner. China can’t be individually targeted. If South Africa did go after China they could raise a dispute at the WTO, which we’d almost certainly lose.
You could argue convincingly that the traditional retailers pay 45% duty when they import clothing by the container load, and that it’s unfair that consumers can import the goods directly without paying the duty.
This is true, but the concession was created to allow couriers to operate more efficiently. If we burden the couriers with an extra cost caused by the delay, then the cost of sending items by courier will increase. Given we don’t have a functioning SA Post Office there is no feasible alternative for small parcels from abroad.
If the concession is removed, the cost increase on the imported clothing would be dramatic, moving up threefold from 20% to 60% (45% customs duty plus 15% VAT). At these levels, people would be far less happy to swallow the VAT and duties on returns, and I see no way for now for either Sars or the couriers to handle large volumes of claims. The local retailers would obviously favour this, but it’s not that simple.
According to Wits University researchers Agnes Erzse and Aviva Turgendhaft, “South Africa has persistently high rates of hunger and malnutrition among mothers and children. More than a quarter – 27% – of children under five are stunted and 61% of children are iron-deficient.” In such an environment, having extra money over because less was spent on clothing becomes really important.
Back to Camilla. I have no idea how Sars will handle claims when goods are returned to foreign retailers in volume. This may very well be the reason why this change is being delayed.
Donald MacKay is founder and chief executive of XA Global Trade Advisors and Anneke Jansen van Vuuren an analyst at XA Global Trade Advisors. MacKay has been advising local and foreign companies on global trade issues for more than two decades. X handle: XA_advisors; email: donald@ xagta.com; website: xagta.com. The views in this column are independent of Business Report and Independent Media.
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