It is not all growth in eBusiness.
Courier, express parcel (CEP) businesses have been very happy with the growth in purchases over the Internet, because the parcel must be delivered. However, not all governments are happy about the loss of tax revenue and the potential downsizing of traditional retail jobs.
Russia, with the most reported Internet users in Europe, has been a potential country for developing on-line buying markets, but that has changed. The Russian Customs service now requires CEP companies to prove the value of each package contents is less than U$235, through providing a copy of the consumer’s purchase receipt and their personal identification details.
These requirements delay the rapid flow of packages, so the international CEP companies in Russia have ceased consumer deliveries. But this situation is not isolated.
The more that countries reduce their rates of income tax, the more reliant they are on consumer taxes, such as Value Added Tax (VAT), Goods and Services Tax (GST) and Sales Tax. However, as the focus of on-line purchases is global buying and speed of delivery it puts pressure on customs services to have a high tax free threshold, so that parcels are not delayed. For example, Australia currently has a very generous $A1,000 duty free limit and Nil GST payment for international on-line purchases; but other developed and developing countries are more restrictive.
Develop a standard solution
CEP and financial intermediary companies can make a good income from international parcel deliveries and this is sufficient incentive to increase parcel volumes; yet both groups state they are unable to provide solutions to collect duty and consumer taxes on behalf of governments.
But here is a good example of the potential for collaboration that we hear so much about. It is possible for the two groups, through a joint taskforce, to provide standardised electronic tools for both governments and companies to use.
The necessary data is already available e.g. payment has been made by the recipient with the order, so there is a record of who made the purchase, the amount paid, the delivery address and email address. The supplier knows which CEP company to use, so the consumer’s details can be attached to the shipping documents used as pre-arrival information for Customs in the destination country. On receipt of the parcel details into the Customs system, it could automatically calculate the duty, tax and service charge payable and invoice the consumer, who pays electronically. Upon receipt of the payment, Customs issues a release authorisation to the CEP company, which electronically attaches it to the shipping documents prior to shipment.
It will not be an easy exercise, but is ‘doable’ and certainly worth the potential additional business, just from Russia.