Online auction tax won't hurt, analysts predict

"It is a big pie, but the government can only grab a very small slice of it."

David Chou, Market Intelligence Center researcher

The taxation regulations to be enforced on online auctioneers, who are required to pay the same tax as brick-and-mortar stores, will not im-pede Taiwan's growing electronic-commerce industry, operators and analysts said yesterday.

"I don't think the measure will put a damper on online shopping, especially the auction sector, as the number of sellers that the regulations apply to is still small," said Ruu Wu (吳苑如), public-relations supervisor of Yahoo-Kimo Inc (雅虎奇摩), the nation's largest online auction site.

Most of the huge number of online sellers are amateurs that conduct a customer-to-customer type of e-commerce, instead of the profit-driven business-to-customer one as stipulated by the regulator, Wu said.

Transactions on Yahoo-Kimo's auction site topped NT$15 billion last year and the amount is expected to jump by as much as 50 percent this year, showing that local consumers have adopted the habit of shopping on online auction sites, which usually offer better deals, Wu said.

Angel Cheng (成葆齡), PR manager of eBay Inc's Taiwan branch, also said that although taxation would increase costs, the measure will not deter wannabe online retailers from entering the business, due to the comparatively lower costs than brick-and-mortar stores.

The Ministry of Finance ordered that online-auction sellers who earn more than NT$60,000 a month in sales had to register their businesses with the government by tomorrow. If eligible sellers fail to register, they will receive fines amounting to as much as 10 times the amount of tax they attempt to evade.

Revenues between NT$60,000 and NT$200,000 a month will earn a value-added tax (VAT) of 1 percent, while monthly sales exceeding NT$200,000 will be taxed at 5 percent, and the sellers also have to issue invoices to buyers.

Aside from VAT, online sellers must also pay a 3 percent house tax, instead of 1.8 percent if they store merchandise in their homes.

"It is a big pie, but the government can only grab a very small slice of it," said David Chou (周樹林), a research manager at market researcher Market Intelligence Center (MIC, 市場情報中心).

Because of the large number of online sellers, individual monitoring by the tax authorities is hard. Besides, sellers can use many ways to dodge tax, such as transacting with buyers in private to avoid any records, Chou said.

Moreover, the tax authorities may find it hard to track down the real identities of sellers, as many of them provided false personal information to protect their privacy, Chou said.

The Taxation Agency under the finance ministry said it has no statistics of registrations as of yesterday.