Regulatory changes that will impose a 45% import duty on all imported clothing items that come into South Africa will level the playing field for local retailers, the CEO of value fashion retailer Mr Price (MRPJ.J) said on Thursday.
Anthony Thunström, the CEO of upmarket fashion retailer TFG (TFGJ.J) told investors last week that the group and other local clothing retailers had been working together with the South African Revenue Service (SARS) and customs authorities "to ensure that pure-play imports attract similar duties to the products that we import into the country."
Local retailers and pure-play e-commerce retailers have raised concerns over Chinese fast-fashion online players Shein and Temu exploiting tax loopholes by exporting products to South Africa in small quantities to avoid higher duties.
South Africa imposes a 45% import duty plus value added tax (VAT) of 15% on imported clothing packages worth over 500 rand ($27.14). Parcels that are below this amount are charged about 20% import duty and no VAT.
"It's undeniable, I mean you can't sit and say that those foreign e-commerce players haven't had an impact on the market," Mr Price Chief Executive Mark Blair told investors.
As a result of the crackdown, "in a lot of cases you're going to be seeing these global retail prices going up close to 40%. That will be a more level playing field for us as well," he added.
Local retailers say these practices give offshore online merchants an unfair advantage in the local market as they typically import merchandise in bulk by ocean freight, pay duties once the goods arrive at port and incur more logistics costs moving the products around till it reaches the consumer.
These costs make it hard for them to match the prices with those offered by Shein and Temu, whose prices have aggressively driven demand.
The "commitments we've received from SARS, from July 1 those parcels below 500 rand that were attracting a minimal duty will now be taxed at exactly the same rate of 45% plus VAT that we would pay," Thunström said.
SARS spokesperson Anton Fisher said the revenue service expects all tax payers and traders to comply with the country's tax and customs legislation and pay the necessary customs duties and VAT.
($1 = 18.4250 rand)
