The South African Revenue Service (SARS) has committed to taxing all clothing imports with an import duty of 45% plus VAT from next month, which means an end to the de minimis loophole according to local news reports.
This means items packaged in small quantities will be taxed at the same rate as large quantities with reports claiming the aim is to curb tax loopholes exploited by international platforms and end any unfair advantage to online fashion retailers based overseas.
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The CEO of Inospace, a provider of serviced logistics parks in South Africa, Rael Levitt believes the new measures will support free market dynamics and will benefit entrepreneurs.
He said: “It is crucial that local businesses are given a fair chance to compete. These new regulations are a necessary step to ensure that South African companies can operate on a level playing field.”
According to Reuters, the CEO of fashion retailer TFG, Anthony Thunström, along with other local clothing retailers have 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”.
In the US a bipartisan coalition hopes to close its de minimis imports loophole that allows packages valued at $800 or less to reach US consumers without facing any taxes, fees or inspection.
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By GlobalDataHowever, a recent study from economists at Yale and UCLA suggests removing the de minimis exemption on US imports would disproportionately impact low-income families as Customs and Border Protection announces tougher enforcement of the rules.
Singapore-headquartered ultra-fast fashion giant Shein is often cited as being one of the biggest beneficiaries of the de minimis loophole. However, in July last year the retailer told the American Apparel & Footwear Association (AAFA) it wanted to work together with US congress on de minimis policy reform.
Shein executive vice chairman Donald Tang wrote in a letter to the AAFA: “In fact, we think the exemption needs a complete makeover”.
At the time GlobalData retail analyst Neil Saunders told Just Style exclusively the intervention could be seen as an attempt by Shein to make it seem like part of the solution to some of the issues around the de minimis rule rather than being part of the problem.
