New regulations tighten tax and compliance net for products imported into bloc

JENS KASTNER, Contributing writerJuly 23, 2021 17:17 JST

HAMBURG, Germany — New EU e-commerce rules should make online retailers based in the bloc more competitive with Chinese rivals and bring in more tax revenue, but they are also likely to drive up prices for consumers.

One measure, which took effect at the beginning of the month, eliminates a loophole under which packages declared as gifts worth less than 22 euros ($26) were exempt from valued-added tax. Now all mailed imports will be taxed at 19%.

Another measure, effective July 16, requires companies involved in handling imports from manufacturers without their own representatives in the bloc to document the products‘ safety risks and technical specifications.

This rule is aimed at reducing imports of Chinese products not made to EU standards, such as baby rattles with sharp, loose parts, Wi-Fi routers that interfere with neighbors‘ internet signals and ear wax cleaners that damage eardrums.

In a case that helped spur the regulation, an Austrian woman was electrocuted in her bathtub when a faulty mobile phone charger cable from a Chinese vendor fell into the water. German authorities confiscated 21 million substandard imports last year alone.

Some bloc members already took unilateral action on Chinese e-commerce imports earlier.

Germany, for example, has seen tax receipts soar and the number of Chinese vendors registered with the authorities climb from 432 to 48,000 since 2018 when it began requiring platforms to pay 19% tax on orders that lacked any documentation of VAT collection.

Sweden saw consumers refuse to accept delivery of hundreds of thousands of packages after enacting in 2018 an administrative fee of 75 krona ($8.62), payable by recipients, on packages originating from outside the EU.

The new EU-level measures could slow the shift among European consumers toward Chinese vendors, who make up a majority of the 10,000 biggest sellers on Amazon.com’s web stores in Spain, France and Italy, according to research company Marketplace Pulse. The share of sales from China-based sellers on Amazon.com’s German storefront stood at 40.2% as of May, up by a third from a year earlier.

„That online sellers from third countries now have to appoint a recognized representative within the EU strengthens consumer protection and makes the competition fairer,“ said Harald Gutschi, managing director of Austrian online shopping platform Unito. „It has also long been time that all market participants are treated equally in terms of taxation, as many Asian sellers have wrongly declared packages‘ value to make the most out of the 22-euro exemption.“

Continue: https://asia.nikkei.com/Business/Retail/EU-to-force-Chinese-online-vendors-to-play-by-its-rules