South Africa introduces VAT on low value parcels to protect garment industry

South Africa will temporarily impose VAT on low-value parcels to help the apparel industry compete and “promote legitimate trade for the country’s economic development in the era of e-commerce,” according to a press release from the South African Revenue Service (SARS).

“SARS has noted legitimate concerns about the importation of various goods, particularly garments, via e-commerce. A number of importers have failed to pay the required customs duties and VAT on these imports, resulting in unfair competition with other players in the sector,” the press release said.

For imported parcels with a value of less than R500 (approximately €25), traders were exempt from paying customs duties or VAT, as a ‘concession’, due to “the sheer volume” of the trade. Importers were only paying a flat rate of 20 percent. This is set to change. According to the report, the country will introduce VAT on top of the current import tariff from 1 September 2024. The amount of VAT on top of that is not specified. SARS added that the measure is in line with the World Customs Organisation (WCO) framework.

Trade magazine Reuters reports that local entrepreneurs have previously expressed concerns about Chinese fast-fashion giants Shein and Temu “taking advantage of tax breaks by exporting products in small quantities to South Africa to avoid higher import duties.” According to the local entrepreneurs, foreign e-commerce companies have an unfair advantage in the market.

South Africa follows EU’s lead

South African entrepreneurs are not the only ones who want to commit themselves to the local economy. Dutch entrepreneurs and consumer organizations have written a letter to Dirk Beljaarts , the Minister of Economic Affairs in the Netherlands (party PVV) since July 2, asking whether the government will accelerate the implementation of consumer protection to create “a level playing field” for entrepreneurs. Earlier, the Belgian federation Becom claimed that popular e-commerce companies such as Shein and Temu have an unfair advantage. German companies want fair competition conditions against Chinese platforms such as Temu, Shein and Wish. The German SME started a petition that also urges Europe to abolish subsidies.

France’s National Assembly recently gave the green light to MP Antoine Vermorel Marques’ anti-fast fashion plans : an advertising ban and eco-tax on cheap clothing. The bill calls for a gradual increase in fines, capped at 10 euros per item of clothing by 2030, as well as a ban on advertising for such products in an effort to reduce the environmental impact of fast fashion.

This article was originally published on FashionUnited.NL, translated and edited to English.