South Africa will tax small packages to boost competition in the apparel sector

As a temporary step to safeguard the garment sector from intense competition from foreign e-commerce giants like Shein, importers of low-value packages going to South Africa will soon have to pay value added tax, the nation’s tax office announced.

The European Union, which is debating doing away with its duty-free cap as part of a customs reform, is among the nations that have followed suit.

Thursday, the South African Revenue Service announced that it had “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.”

It also said that this circumstance has led to “unfair competition.”

A “concession” for items priced under 500 rand ($27.25) was previously established by SARS, citing a significant amount of e-commerce imports. Under this concession, importers paid a flat rate of 20% in lieu of customs charges and no VAT of 15%.

SARS said that, as a temporary measure, it will add VAT to the existing 20% flat rate on low-value shipments on September 1 in order to resolve concerns about competitiveness and to give clarity to e-commerce importers.

The 20% flat rate will be reconfigured by November 1 into the World Customs Organization regime with the proper tariff rates, among other adjustments, it noted.

E-commerce and physical fashion stores have pushed South African regulators to level the playing field by levying a 45% import charge on all garment imports, regardless of price.

Shein, a British company formed in China, aims to go public and credits its success to its “on-demand business model and flexible supply chain.”

One dollar is equivalent to 18.3491 rand.