China probes Amazon and other e-commerce sellers for tax evasion
Chinese tax authorities have instructed e-commerce giants, including Amazon.com Inc., to provide sales data for the first time, according to sources, representing a significant step in the effort to combat tax evasion by merchants utilizing online platforms for cross-border transactions. In recent months, tax bureaus throughout China have instructed major platforms to provide third-quarter revenue data from certain Chinese merchants, aiming to address the issue of underreported sales, according to online sellers. Amazon began providing data in mid-October, whereas competitors from China, such as Alibaba Group Holding Ltd.’s AliExpress, Temu, and Shein Group Ltd., submitted their information after being requested weeks prior, according to sources, though the platforms are not being accused of any wrongdoing by tax authorities. The data has provided Chinese regulators with a clearer understanding of online exporters’ sales, which frequently exceed the figures reported to tax bureaus, and according to sources, if they adjust their filings to align with platform data, sellers may encounter value-added taxes of up to 13 percent along with corporate levies, potentially erasing profit margins due to back taxes.
According to China’s tax regulations, businesses generating annual revenues exceeding 5 million yuan (approximately $703,000) are required to remit up to 13 percent in VAT, with merchants exempt from the levy only if they can present customs clearance documents and additional proof of export — a requirement that most online sellers find challenging to meet given their current business structure. For the first time, Chinese sellers represent over 50% of Amazon’s global active seller base, according to a report, and an Amazon spokesperson stated that the company “complies with all applicable laws and regulations in every country where we operate.” Requests for comment from China’s State Taxation Administration, Shein, Temu, and AliExpress went unanswered. The decision arises as China’s necessity for fiscal revenue eclipses its intention to assist smaller exporters affected by Donald Trump’s new tariffs, and according to a report in June, Beijing has escalated its initiatives to gather taxes on the overseas income of its citizens following China’s adoption of the Common Reporting Standard, a worldwide information-sharing framework designed to combat tax evasion.
It marks yet another setback in a tumultuous year for Chinese e-commerce, which has already faced challenges due to Trump’s elimination of the de minimis exemption — a regulation that allowed inexpensive packages to enter the US without duties and contributed to the growth of Temu and Shein. Exporters expressed optimism regarding the reduction of US tariffs following a recent summit between the US and China, though they indicated a desire to mitigate potential risks associated with any future disruptions in trade relations. Online exporters in the mainland often register numerous companies across various cities to drive traffic, as platforms such as Amazon permit only one store per registered entity, and merchants generally channel goods through a mainland firm to a Hong Kong company, which officially owns the stores and sales — a structure that enables them to avoid corporate taxes in mainland China. Within China, there are reports indicating that sales from a single store are communicated to authorities, resulting in minimal taxation, and according to several sources, tariff uncertainty was more manageable because merchants could either transfer the costs to consumers or under-report product value to US customs agents.
Online marketplaces connect global consumers directly with Chinese sellers, frequently providing more affordable products and expedited shipping, and the sector’s export value increased by nearly 17 per cent in 2024, surpassing the 7.1 per cent growth rate for total exports, according to customs data, even as growth decelerated amid ongoing trade tensions. Several sellers informed that they received text messages from local tax authorities requesting immediate payment following the accurate sales figures reported by platforms such as Amazon, while two merchants from smaller, less affluent cities or counties reported receiving urgent calls or visits from local tax bureau staff requesting payment. Several individuals expressed their intention to wait and observe the resolve of the tax authorities in pursuing payment or if any industry experts devise strategies to assist them in circumventing repayment of taxes.
