Taxation on Internet purchases
The time has long gone when Internet shopping was something mysterious and shocking for Belarusians
The time has long gone when Internet shopping was something mysterious and shocking for Belarusians. Many people are now familiar with using a keyboard to order meals, home appliances, footwear and clothes, to name but a few. There has been a surge of popularity in buying from international sellers and, today, parcels from China, the USA and Russia arrive in the country and make their way to the Belarusian buyers. The growth in the number of postal items arriving from abroad has already caused concern in Government departments. The authorities take issue with the fact that a significant amount of currency is going abroad. While many goods bought on foreign platforms do not come into the category of critical imports, these items could be bought in the country and produced by local manufacturers. Our MT correspondent has been investigating whether foreign Internet shops are a real threat to the well-being of local manufacturers.
Recently, the Association of Internet Trade Companies of Russia (AKIT) addressed the Belarusian business community with a request to initiate discussion at the Eurasian Economic Commission of a possible decrease in duty-free import taxes throughout the Eurasian Economic Union, and also to work out the question of the taxation of foreign Internet companies in place of profit making. The Association considers that the levels operating Belarus are at the most optimum and ‘civilised’.
The problem seems to be that the number of purchases from abroad has increased significantly in recent years. Just 4 years ago, the number of international postal items addressed to Belarusians was less than 1 million. The current annual volume of foreign parcels is close to 10 million, while last year our buyers spent about $450 million on the Internet. This includes spending on both foreign and local Internet sites and is small in comparison with other countries, especially when we consider that the volume of all consumer imports in the country for last year reached $9.3 billion. In addition, not all parcels are purchases. There are many Belarusians who regularly receive gifts from friends and relatives living outside the country.
The Ministry of Trade figures in more detail show that the share of Internet trade decreased last year in comparison with 2013 (about 1.5 percent to 1.3), though stable growth was observed before that. The Ministry considers these to be the negative consequences of the growth of the number of purchases from abroad. There is still the open-ended question of what should be the level of taxation on Internet trade. This issue would apply to the entire Eurasian Economic Union including Russia, Kazakhstan and Armenia. At the end of last year, Russia’s President Vladimir Putin expressed his opinion that the figures should be standardised across all the countries of the economic block. Currently, in Russia and Kazakhstan duty-free imports of international postal items is set at 1,000 Euros a month, while in our country it is 200 Euros. It would not make sense for Belarus alone to change the rate as, if our partners would not adjust theirs simultaneously, Belarusians would simply buy goods in Chinese online shops indirectly through Russia.
The Director General of the Nadezhnye Programmy Unitary Enterprise, Lyudmila Chekina, recognises that the number of international postal items in our country has increased significantly, and it is quite understandable that desire to regulate this market causes dissatisfaction among shopaholics. It has recently been made public that the National Bank has sent a letter of recommendation on the issue to the commercial banks encouraging them to ‘give reasonable consideration to the possibility and feasibility of the collection of additional taxes at the credit card payment stage for Internet purchases’. The National Bank reassured consumers that this is not direct commission, but only an invitation to financial bodies to discuss the question. The fact remains however, that bankers have no legal possibility of withholding taxes.
While the Ministry of Trade recommends that we pay attention to the European experience of regulating electronic commerce, we must consider the appropriateness of using similar measures in our own country. When European buyers are shopping online, they pay VAT (value-added tax) if the sum of the purchases exceeds on average 22 Euros. Consumers also pay additional customs duties if they have exceeded the average 150 Euros. In Brazil it is even stricter: they pay 60 percent duty on purchases from $50-500. Tax laws in these countries are tightly regulated and there is no possibility of tax evasion without incurring hefty penalties for fraud.
Those manufacturers who are concerned they may suffer from the volume of foreign purchases should not despair, unsettled foreign markets are the ideal time to actively promote and market goods and services at home.
By Polina Konoga