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E-commerce sector still in its infancy to bear tax burden — experts

By Bahaa Al Deen Al Nawas - Aug 24,2019 - Last updated at Aug 24,2019

To protect local shops, the Cabinet has imposed fees on clothes, shoes, foodstuffs and children's toys (Photo by Amjad Ghsoun)

AMMAN — Experts on Saturday raised eyebrows over the recent Cabinet regulations on e-commerce, which they say is a far cry from measures implemented around the world.

The German government last year approved a draft law to crack down on value-added tax (VAT) fraud in online sales by tightening the rules for e-commerce giants like Amazon and eBay, according to international news sources. The government estimated that it loses up to 500 million euros ($580 million) a year in unpaid sales taxes on goods purchased online from companies outside Germany.

Some countries, including Germany as well as the UK, Australia, and New Zealand, are increasingly depending on online marketplace platforms such as Amazon and eBay to take a role in collecting VAT or goods and services tax (GST) from foreign sellers, according to a Bloomberg tax report published last April.

For example, New Zealand will require online platforms to collect GST on imported goods valued below NZ$1,000 ($676) starting Oct 1st, 2019, according to the Bloomberg tax report, which also noted that online platforms in Australia have been responsible for GST owed on sales through their platforms since 2017

"The volume of e-commerce revenue and size of their companies in some countries reaches tens of millions of dollars, which justifies their governments imposing taxes on e-commerce companies, but in Jordan, we are still in the process of developing technology and adopting digital economy," economist Husam Ayesh said during a phone call interview on Saturday.

He explained that Jordan should advance the e-commerce sector and its technology until it is effective enough to make taxes and fees imposed on it useful. 

The value of e-commerce in the overall trade in Jordan is not very significant, Ayesh said, noting that imposing customs fees on e-commerce products as a reaction to traders' complaints about the regression in their sales instead of doing in-depth analysis of the overall situation first might have negative effects for both buyers and traders.

"The root problem we need to focus on is the actual economic performance that does not create growth, increase GDP, create jobs or increase people's purchase power," he said.

He explained that he is not against imposing fees on e-commerce, as it is a form of trade that brings profit. E-commerce should be regulated, but the the sector needs first to be developed, he said. 

Amman Chamber of Commerce President Khalil Hajj Tawfiq posted on his Facebook page on Friday evening: "E-commerce and online trade are an inevitable flood that is certainly coming, and what reached us of it is only a small river, so we need to decide how to face the flood and ask ourselves if we are ready to face the consequence if deciding not to face it."

In the post, he called for a discussion that puts national interests at its core and "selfishness aside", respecting the law and rejecting tax evasion or smuggling. 

"We need to stop criticising the government only for the sake of criticism, deal with traders as citizens and protect all citizens from cheating and manipulation to help them not shoulder unnecessary burdens," Tawfiq said in his post. 

For his part, Asaad Qawasmi, a representative of the clothes, garment and jewellery sector at the Jordan Chamber of Commerce, told The Jordan Times that in certain European countries, those who order packages online pay taxes and fees of up to 17 per cent of the bill's value besides the fees for other services such as shipment, protecting European traders. 

In the UAE, the government imposes 5 per cent fees on goods ordered online but also takes only 5 per cent from traditional traders, and that ensures the competition is fair for all, Qawasmi said, adding that in Jordan the difference between e-commerce and traditional traders is still great. 

When asked about any suggestions from the chamber to the government, Qawasmi said that they proposed amending the decision to customs fees of JD20 for each order up to JD50 and JD30 fees for any order between JD50 and JD100 to balance things out with the fees that traditional traders pay including bills, taxes, rent and salaries. 

Prior to the Cabinet decision, Jordanians were able to purchase clothes, shoes, foodstuffs and children's toys of up to JD200 per month without having to pay customs fees, with the cap being JD2,400 each year; however after the decision, the cap will be JD500 each year.

For authorisation of the products purchased online, customers have to visit to fill in the necessary data. Then they have to use their name to authorise the entry of the purchased products from the categories in question (clothes, shoes, foodstuffs and children's toys), paying JD5 for each order up to JD50 and JD10 for each order between JD50 and JD100, without exceeding the annual cap.

However, if a purchase is made without filling in the data on the website beforehand, customers have to pay JD15 for each order up to JD50 and JD25 for each order between JD50 and JD100. 

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