Taxman coming for Temu and Shein

The South African Revenue Service (SARS) will implement an import duty of 45% plus VAT on all clothing from 1 July 2024 to address the imbalance between platforms like Temu and local retailers.

This comes after several local e-commerce players claimed that companies like Shein and Temu exploited tax loopholes to undercut South African retailers.

However, there is some resistance from local couriers.

In early June 2024, The Foschini Group (TFG) CEO Anthony Thunström said SARS has committed to tax all imported clothing parcels with a duty of 45% plus VAT from the start of July.

“It’s a big move, and I think it will help local industry, including local production and jobs,” said Thunström.

Local retailers claimed that Shein and Temu were exploiting the de minimis rule, allowing them to import clothing parcels valued at under R500 with just a 20% import duty with no VAT.

The retailers claimed this puts them at a disadvantage, as they are still forced to pay the 45% import duty plus VAT for all clothing imports.

CEO and founder of Maritime Legal Solutions and Chartered Tax Adviser Mark Goodger explained that SARS’ remedy isn’t designed to hurt South African consumers but rather level the playing field for local retailers.

Citing a concession document that goes back several years, Goodger explained that there is a provision for the courier industry to pay a flat fee of 20% monthly to support trade and lessen the administrative burden on customs.

“In respect of high-volume, low-value consolidated shipments, it appears apparent that Shein and Temu have utilised this provision,” said Goodger.

He added that complaints from local retailers are based on the fact that they can’t benefit from this rate. Instead, they pay a rate of approximately 45% and 15% VAT to import similar products.

As a result, SARS has been asked to remove the exemption on products like textiles, apparel, and clothing to level the playing field.

“It is not a move directed at depriving any particular community of receiving that low-value product,” said Goodger.

“It is rather a corrective move towards a level playing field, and in terms of the customs that the values declared must be correct.”

The fight for and against Shein and Temu

While Shein has been available in South Africa for some time now, Temu only launched locally in January 2024, and both have seen immense success in the country.

The marketplaces have been so popular that Buffalo International Logistics — Shein and Temu’s logistics partner in South Africa — warned customers that their orders would be delayed in late March 2024.

“We’re reaching out to inform you of a delay in your order due to a surge in orders,” it said in a notice sent to customers.

“We sincerely apologise for the inconvenience. We expect deliveries to be delayed by approximately one week.”

Shein and Temu compete directly with local e-commerce platforms such as Superbalist and Bash, prompting several retailers to complain about the companies undercutting their prices.

Many accused the Chinese retailers of exploiting tax loopholes to offer products at significantly lower prices than South African retailers can.

National Clothing Retail Federation executive director Michael Lawrence was among the first to publicly sound the alarm and flagged the issue with SARS.

Takealot owner Naspers even warned local retailers of the threat posed by platforms like Shein and Temu in its annual results for the year ended 31 March 2024.

“The rise of e-commerce platforms such as Shein and Temu in South Africa underscores a growing concern that threatens the nation’s reindustrialisation and localisation efforts,” it said.

“These e-commerce platforms exploit outdated regulations and loopholes by using shipping methods that allow them to offer products at exceptionally low prices while avoiding duties, taxes and other government fees imposed on conventional retailers.”

However, consumers have voiced their displeasure at the upcoming 45% import duty plus VAT for imports, with some launching a petition to prevent the tax hike.

The petition, titled “Petition for SARS not to increase tax on Temu and Shein orders,” had garnered more than 17,200 signatures by the time of publication.