Retailers ask for taxation of Shein, Shopee and AliExpress and demand actions from the government and Congress

Report from Estadão addressed the pressure that entities in the retail sector have applied to establish a taxation model on foreign e-commerce sites such as Shein, Shopee and AliExpress, in order to improve the competitive environment. Dr. Marcos Correia Piqueira Maia, partner at Maneira Advogados, was interviewed to comment on the matter.

Retailers ask for taxation of Shein, Shopee and AliExpress and demand actions from the government and Congress

February 24, 2023

By João Scheller

Sector representatives estimate that tax evasion due to the presence of foreign websites in the country could reach R$14 billion annually; foreign companies claim to comply with Brazilian legislation

Retail sector entities have been putting pressure on the federal government and Congress in an attempt to improve competition with foreign e-commerce companies that have started to operate in the online sales market in Brazil. National companies have been feeling harmed by sites like Shein, Shopee and AliExpress, claiming that they do not pay taxes nor respect security and anti-piracy regulations in the country.

The estimate from sector representatives is that tax evasion due to this scenario is around R$14 billion annually. With the increase in sales, the situation is getting worse, say the entities. When asked about charging taxes, however, AliExpress, Shopee and Shein state that they act in accordance with the rules and regulations stipulated by Brazilian law.

According to Brazilian retailers, the problem occurs mainly because of the current taxation scheme on product imports. International purchases between individuals are exempt from fees up to US$50. Sales on foreign platforms are often considered transactions of this type.

“In B to C(business to consumer) operations, where you have a legal entity on one side, in this case, international platforms, and Brazilian consumers on the other, this type of operation is not legal”, argues Edmundo Lima, spokesperson for the Brazilian Textile Retail Association (Abvtex).

The situation has caused sector representatives to accuse the participation of these companies in the market as a type of unfair competition. With websites and apps translated into Portuguese and payment options equal to those of national retailers, consumers have the same ease of purchasing in foreign e-commerces as in the digital versions of national retailers.

“It generates unfair competition with e-commerces located here in Brazil, which are regulated, have stock and have to comply with tax and labor legislation”, says Mauro Francis, president of the Brazilian Association of Satellite Retailers (Ablos), which brings together the main Brazilian retailers.

According to him, talks have already been held with the government of President Luiz Inácio Lula da Silvato try to reach an agreement.

“We had a perspective of advancing this with the previous government, which ended up colliding with the electoral period. Our expectation is that a new government will pay special attention to the issue”, says Edmundo Lima.

In addition, even operations that, by law, should be taxed, often escape the taxation scheme due to the high volume of products at customs, retailers say. Thus, a considerable part of website transactions with marketplaces located abroad do not pay any type of tax to sell to the Brazilian public.

The situation is not new. The Chinese AliExpress, for example, has been operating since 2010 and has had a version of its website in Portuguese since mid-2013. Shopee, from Singapore, has been operating in the country since 2019, and the Chinese Shein has been selling its products in Brazil since 2020.

With the arrival of the pandemic and the boom in online shopping, however, the volume of sales exploded, as did complaints from retailers.

To give you an idea, a 2021 study by the Institute for Retail Development (IDV) coordinated by the consultancy McKinsey estimates that tax evasion from digital retail in 2020 was around R$20 billion annually. Of these, 70%, or around R$14 billion, were from foreign e-commerces alone.

The situation gained even more strength after the arrival of the Chinese fast fashion giant Shein. The company began operating in the country in 2020 and, since then, has seen sales jump among Brazilian consumers.

In recent months, the company has carried out actions with physical stores, in the pop-up format (temporary), trying to win over a greater number of customers. This year, Shein intends to open five stores in the same format.

Beyond taxes

“If it were a company, there would be a whole import procedure. You have to have licenses, registration with the Federal Revenue Service, a series of things. Regardless of the value”, explains lawyer Francisco Lima, partner at Gasparini, Nogueira de Lima e Barbosa Advogados.

He says that retailers located in Brazil must comply with all legislation in force in the country, in addition to paying taxes on the entire chain of products sold. And he mentions that a pair of pants that cost R$100 on a Chinese website would have to be sold for around R$150 by a national retailer to include all state and federal taxes.

In addition to tax problems, retailers claim that international e-commerces also do not respect technical standards for selling products, in addition to opening space for the sale of counterfeit products on the platforms.

“It affects competition, as companies are concerned about the origin of products, they do not sell counterfeit products, in addition to full compliance with current legislation in relation to labeling and consumer health and safety”, explains Edmundo Lima, from Abvtex.

Jorge Gonçalves Filho, president of IDV, states that he considers that the current situation is a “technological evolution of what we had in the past with street vendors”. "Now, consumers can buy directly from China. It's become very easy to buy", he adds.

Regarding technical standards for selling products, AliExpress says it monitors “any suspicious product that may violate intellectual rights.”

Shopee says it takes “proactive measures to prevent such products from being listed on the marketplace.”

Also in a note, Shein states that it requires its suppliers to “comply with all legal parameters, strictly follow our Code of Conduct, as well as company policy, making sure that their products do not infringe the intellectual property of third parties.”

Global issue

Although the discussion about the taxation of imported products is related to national legislation, the problem is not restricted to Brazil. Other countries face dilemmas related to the digital era with laws designed for an analog world.

“There is still no clear and obvious answer, because you are involving the importation of individuals, the range increases a lot and makes inspection difficult”, explains lawyer Marcos Maia, partner at Maneira Advogados.

“One of the main points concerns the definition of responsibility for paying taxes, that is, who will be responsible for collecting specific taxes on sales to public coffers”, he explains.

Sector representatives, for example, argue that foreign companies with a relevant operational level in the country must open offices in Brazil so that they can comply with tax legislation. Others advocate greater supervision and tracking of the purchasing process.

“Transactions are made through a digital payment method, either Pix, or credit card, or a transfer. So, we need to find a way to follow this money and be able to tax the transaction correctly”, argues Gonçalves Filho, from IDV.

https://www.estadao.com.br/economia/negocios/sites-asiaticos-brasil-varejistas-competicao-nao-justa/