Rate hike ends tax-free era for cross-border e-commerce business

Most of the consumers who choose cross-border e-commerce are young, below 35 years on average, and don't have the strongest consumption capability. In contrast, Chinese tourists traveling overseas are older and wealthier. That about 120 million tourists who traveled abroad spent nearly $250 billion last year shows Chinese people's strong purchasing power. And the government believes a mild increase in tax will not dampen consumers' strong demand for infant formula and other quality products, and the reliable services that developed countries offer.

Besides, e-commerce helps domestic consumers bypass some foreign companies' differentiated pricing policies for the Chinese market.

The tax from cross-border e-commerce is expected to become a steady contributor to government revenue, which it needs in these times of debt pressure. And there is reason to believe the government has raised the tax on goods sold by cross-border e-commerce platforms after careful calculation, so as not to prompt consumers to tighten their purse strings.

In fact, China's manufacturing industry is expected to directly benefit from the government's move, because some price-sensitive consumers will shift to domestic products after the tax hike makes foreign goods on e-commerce platforms more expensive.

But to boost domestic consumption, it is better to focus on solving the market's problems rather than increasing tax on alternative retail channels. Traditional enterprises, on their part, should spend more on research and development to offer better after-sale services. And the government should lower logistics costs, cut unnecessary trade links and pay more attention to improving customers' shopping experience and protecting their rights.

The author is a writer with China Daily. liyang@chinadaily.com.cn