Online shops facing registration, taxation

08:14, February 01, 2010      

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Both running an online store and shopping at one would become more expensive for owners and shoppers alike if a new government proposal to register web businesses takes effect.

Citing consumer rights protection and the need to fight fraud, the State Administration of Industry and Commerce, the department in charge of business registration and regulation, said late last month that it has been drafting a new policy to register and tax web stores.

“Like any other business, web stores should be registered and taxed according to the law,” said Wu Song, an official with the press office of the Beijing Bureau of Industry and Commerce. Beijing became the first city in China to announce a web store registration and taxation policy in August 2008, but no shops have registered to date because the city has not enforced the policy.

Usually the registration fee for a store varies for different areas, but would about 100 yuan ($ 14.6) to 200 yuan, and the taxation would be 3 percent of their sales.
There were no details as to when the policy might be official or how it would be enforced.

The number of web stores broke the 1 million mark in October 2008, according to Beijing-based Intelli Consulting.

About 4,700 complaints on online stores were investigated in Beijing in 2009, with 1,067 prosecuted, according to the Beijing Bureau of Industry and Commerce.

Shopping safely

Zhu Feng, a 30-something employee with the Hebei subsidiary of China Unicom, was cheated after he paid 980 yuan ($143) for a Nokia handset during a sales promotion last May launched by Alipay, the third-party payment platform with Taobao.

“It was super cheap, because it was about 3,000 yuan ($439.4) in the real market,” said Zhu.

“But the seller wanted me to wire the money directly to a bank, rather than through a third-party payment system.”

The third-party payment system transfers the money to the seller only after the buyer receives and is satisfied with the goods.

“But it was a price I couldn’t refuse and eventually I sent the money,” said Zhu.
The bargain proved only to be “bait,” after he and other victims never got their cell phone after paying.

About 30 others were also cheated by the cell phone shop before its website can never be opened, but after tough negotiations they were paid back by Alipay.

But there are also many satisfied customers who prefer shopping with their mouse rather than their feet.

Lan Jiang, a 26-year-old doctoral student at Beihang University in Beijing is one. He said he has bought “almost everything” online, including snacks, sneakers, jeans, an mp3 player, and cell phones for about a year and hasn’t run into any fraud problems.

Lan noted that his only unsatisfactory purchase was a jacket he bought on Taobao, China’s largest web shopping platform, that had a hole in the back but after he complained the dealer refunded his money and recalled all the jackets.

Taobao sales totaled 200 billion yuan ($29.3 billion) last year, or twofold from 99.6 billion yuan ($14.6) in 2008.

“Web shopping is safer and cheaper than buying from brick-and-mortar shops,” said Lan, “because prices and business reputation of web stores are so transparent I can easily find what I want at a reasonable price after comparing a bunch of similar shops.”

“And most usually I would a shop that has a large number of transactions on record and excellent buyer feedback.”

Lan Jiang, a 26-year-old doctoral student at Beihang University in Beijing is one. He said he has bought "almost everything"online, including snacks, sneakers, jeans, an mp3 player, and cell phones for about a year and hasn't run into any fraud problems.

Lan noted that his only unsatisfactory purchase was a jacket he bought on Taobao, China's largest web shopping platform, that had a hole in the back but after he complained the dealer refunded his money and recalled all the jackets.

Taobao sales totaled 200 billion yuan ($29.3 billion) last year, or twofold from 99.6 billion yuan ($14.6) in 2008.

"Web shopping is safer and cheaper than buying from brick-and-mortar shops,"said Lan, "because prices and business reputation of web stores are so transparent I can easily find what I want at a reasonable price after comparing a bunch of similar shops."

"And most usually I would a shop that has a large number of transactions on record and excellent buyer feedback."

Protecting reputation

"I take care of my shop like my baby because reputation is so important to a web store,"said Li Yili, a former IT engineer in her late 20s who runs a cosmetics shop on Taobao. "No one would buy from me if I cheated them."

But despite current regulations, fraud is still commonplace in the real world where every shop is registered with the government, said Yang Bo, an e-commerce researcher with Renmin University of China.

Yang said that the punishment for fraud is too mild (about 10 times the price of what is paid) and suggested that any business found to be fraudulent should be shut down.

"We need a real hearing, not a show hearing on the draft when it is done, so various voices would be heard, and we can have a policy that is good for the market and consumers and acceptable for web stores, "said Yang.

Higher prices feared

However, some worry that the registration and taxation may hurt and even restrain the still maturing web shopping market.

Retail sales amounted to only about 2 percent of total retail sales of consumer goods in 2009, though the online retail sales grew 94 percent in the year to total 250 billion yuan ($36.6 billion), according to China Internet Network Information Center.

The web shopping market could be hurt by the registration policy, said the Beijing-based analyst, because the low profit margin of on-line stores may not be able to afford the taxation.

"I would not even have started my web shop if I had known I would be asked to register it,"said
Qi Mei, a self-employed graduate from Central University of Finance and Economics who started her online clothing shop from high school.

She said her profit margin in cyber space is already low.

"I would not be happy if the web stores are to be taxed, because the stuff would no longer be cheap by then, while the low price is a big reason I go shopping on line,"said online shopping fan Lan.

"The buyer would definitely pay the bill if we are taxed, because our prices would be raised accordingly,"said Chen Rongqin, who sells sportswear on Taobao.

"But I believe taxation of web stores will come sooner or later,"she added.

Source: Global Times
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