Current Status of E-Commerce and Tax Problems in China

• In Event: Taxation 1

Abstract

In the past four years the Internet commerce in China has taken off at an exponential rate. Its business volume has been growing at 53 percent a year. The Internet commerce now accounts for 6.3 percent of the entire retail sales. Both rates surpass the current status in the U.S. The Internet users in the U.S. account for as much as 81 percent of total population, while it is only 42.3 percent in China. This article points out a great potential of the Chinese Internet commerce market in the near future. This article further investigates the commodities of the Internet commerce market. It reveals that, in China, clothing takes the first spot that accounts for 35 percent of the entire Internet commerce market, while, in the U.S., it is the electronics that takes 30 percent share. This aspect shows the different market preference. This paper further examines the tax law governing the Internet commerce transactions. It finds that, in lieu of sales tax, the Chinese government imposes value-added tax to be levied at each stage of the transaction. The tax rate is 17 percent as opposed to 6.75 percent in the U.S. This paper demonstrates an example to show how the value-added tax system is carried out. This paper further offers some planning strategies for those International Internet commerce marketers who attempt to explore the Chinese market.

Authors

• Yali Shen, Yunnan University of Finance and Economics

• James Yang, Montclair State University

• Beixin Betsy Lin, Montclair State University