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SARS closes import tax loophole
Thousands of people have signed a petition opposing the SA Revenue Service’s decision to close a customs loophole on clothing imported from outlets such as Shein and Temu.
Before 1 November, importers had to pay 45% duty on clothes over DKK 500. and VAT. But a “concession” was applied for goods worth less than R500, where importers paid a flat rate of 20% instead of a tariff and no VAT. Exporters could therefore split their orders into “small parcels” worth less than R500 and escape 45% duty and VAT.
According to Simon Eppel, director of policy and research at the Southern African Clothing and Textile Workers Union (SACTWU), this allowed retailers like Shein and Temu to sell their products cheaper, undercutting local retailers and undermining local factories.
From November, imports under R500 are also subject to 45% duty and VAT. In announcing the change, SARS said it had noted “legitimate concerns” that had been expressed over the importation of goods, particularly clothing, by importers who had not paid duty and VAT, resulting in unfair competition.
As a result, SARS said, VAT would be imposed on these imports and customs would be reconfigured from November 1.
Non-specified goods
Launched in 2019, South Africa’s Retail Apparel, Textile, Footwear and Leather Masterplan was designed to strengthen local factories and increase jobs in the industry.
According to Eppel, more than 20,000 jobs have been created and there has been an increase in locally sourced clothing, accessories and footwear by almost 60%.
The master plan also includes measures to minimize customs fraud, which Eppel says is one of the biggest challenges facing clothing manufacturers. Goods are misclassified or underinvoiced to evade tariffs and then sold at deflated prices, undermining local factories. Under the master plan, SARS has increased inspections and seizure of goods.
Michael Lawrence, executive director of the National Clothing Retail Federation, said illegal activity is difficult to quantify, but there are differences of billions of rands between exports reported in China and imports reported in South Africa.
He said he supported the new rates.
But Free Market Foundation policy officer Zakhele Mthembu told GroundUp that people who relied on cheap clothes will not be able to afford these products anymore.
“The government, after being lobbied by local businesses, intends to make imports more expensive so that consumers will buy the already expensive clothes sold by South African retailers,” Mthembu said.
More than 24,000 people have signed a petition on change.org calling on SARS not to implement the change. “South Africans can’t afford this, we buy from Shein and Temu because we can’t afford clothes from local companies, the point of Shein and Temu is affordability,” the petition reads.
A consumer’s point of view
A GroundUp employee bought a pair of fashionable boots from Shein for R300. She said locally that they would have cost her several hundred kroner more and she would have been reluctant to buy them at that price.
It is difficult to compare clothes across retailers because you rarely find exactly the same product for sale from more than one company. But an orange sundress from Shein retails for R132 (including tariffs, as far as we can tell). A similar dress at a local retailer sells for over R200.
A pair of women’s high-waisted ripped jeans retails at Temu for R379. We found a similar product at a lower price on Superbalist. But a similar product in store at a popular chain was over R500.
When we searched the Temu website, we were struck by how fast it is and the number of choices for an item like “men’s jeans”. The website for a very popular local clothing chain was much slower and had far fewer options.
But there are also numerous complaints online about quality and service. An article in The Guardian describes shopping from Temu as “playing a lucky dip”.
Also, returning items in person to major South African retailers such as Mr Price or Foschini is usually straightforward. It is easy to order goods online. Returning items ordered online seems to be more frustrating and requires a lot more trust. Temu’s website describes a decent but complicated return policy; The consumer must hope that a process involving packaging and return via courier will result in a refund.
There are numerous complaints on Hello Peter, a consumer review site, from people who struggled to get or return items or get refunds from Shein and Temu. Nevertheless, the success of these online exporters shows that many South Africans have confidence in their products and delivery model.
Bad working conditions
Shein and Temu operate their production primarily in China, where workers receive very low wages and poor working conditions compared to South Africa.
Shein was founded in Nanjing, China, in 2008. It specializes in fast fashion. Temu, also a Chinese company, started in 2022. Both are online marketplaces that export products from China directly to consumers across the planet. Their Wikipedia pages list numerous controversies and criticisms of the companies, particularly regarding labor practices.
We asked both companies for comment for this article, but neither responded.
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