South Africa to impose VAT on low-value parcels to help clothing industry compete

By Nqobile Dludla

JOHANNESBURG (Reuters) - Importers of low-value parcels destined for South Africa will soon pay value added tax, the country's tax authority said, as an interim measure to protect a clothing industry facing fierce competition from international e-commerce players such as Shein.

The move follows other countries, including the European Union, which is discussing abolishing its duty-free limit as part of a customs reform.

The South African Revenue Service said on Thursday that it "noted legitimate concerns that have been expressed in the importation of several goods, especially clothing, via e-commerce by a number of importers who have not been paying the obligatory customs duties and VAT." 

This situation, it added, has resulted in "unfair competition."

Due to a high volume of e-commerce imports, SARS said it had earlier implemented a "concession" for goods valued at less than 500 rand ($27.25) that meant importers paid a flat rate of 20% in lieu of customs duties, and no VAT of 15%.

To address competition concerns and to provide clarity for e-commerce importers, SARS said it will introduce VAT in addition to the current 20% flat rate on low-value parcels on Sept. 1 as an interim measure.

Other changes include reconfiguring the 20% flat rate into the World Customs Organisation regime with appropriate duty rates by Nov. 1, it added.

Brick-and-mortar fashion and e-commerce retailers have urged South African regulators to impose a 45% import duty on all clothing imports, no matter the price, to level the playing field.

China-founded Shein, which plans to go public in Britain, attributes its success to its "on-demand business model and flexible supply chain."

($1 = 18.3491 rand)

(Reporting by Nqobile Dludla; Editing by Rod Nickel)