The e-commerce tax was designed to address concerns about disparities in the taxes on local and online purchases of overseas products, with the hope more level taxes would encourage more domestic production.
Despite assurances the tax would have no impact on trade between Australia and China, its introduction in early April caused confusion and panic among Australian companies.
The share prices of companies like Bellamy’s, Blackmores and Murray Goulburn plummeted as investors became nervous about the impact of Australian infant formula and fresh food being taxed on major online outlets like Tmall and Tao Bao.
But with very little fanfare the Chinese Ministry of Finance declared on May 25 this year the tax would not take effect until May 11, 2017.
Cross Border Management managing director CT Johnson believes companies can learn valuable lessons about the roll out of the tax.
«We tend to view China and its government as a monolithic, highly coordinated organisation, but it’s not.
«Frequently they will put out a new piece of legislation or regulation just as a test, but it won’t be coordinated with other parts of the government.»
Mr Johnson said the initial introduction of the tax produced some undesirable consequences, by making Chinese consumers unhappy and impacting Chinese importers, so the Ministry of Finance announced the grace period.
Writing in the Dairy Reporter, Chemlinked Reach24H consultant Raymond Ng warned companies producing cosmetics and infant formula might need the next 12 months to ensure they were compliant with the new regime.
Mr Johnson believes Australian companies’ reaction to the roll out of the tax highlighted the need for Australian companies to increase their engagement with people on the ground.
«It was so clear that for the most part they really didn’t know that these changes are coming, and to the extent they did know, they really didn’t understand anything about what the likely impact was going to be.
«Given the fact China is now our largest trading partner and increasingly it is not just iron ore or coal, but food and agriculture, which involves thousands of people along the supply chain.
«I have to say these shocks — as we have tighter integration with China, and as they buy more Australian produce — will be increasingly important for Australian companies to understand what’s going on over there, or face off the problems as they come up.»
In the long run, Mr Johnson anticipated the e-commerce tax would not have a major impact on Australian exports to China, but there was a good chance its design would change over the next year.
Cross Border Management managing director CT Johnson believes companies can learn valuable lessons about the roll out of the tax.
«We tend to view China and its government as a monolithic, highly coordinated organisation, but it’s not.
«Frequently they will put out a new piece of legislation or regulation just as a test, but it won’t be coordinated with other parts of the government.»
Mr Johnson said the initial introduction of the tax produced some undesirable consequences, by making Chinese consumers unhappy and impacting Chinese importers, so the Ministry of Finance announced the grace period.
Writing in the Dairy Reporter, Chemlinked Reach24H consultant Raymond Ng warned companies producing cosmetics and infant formula might need the next 12 months to ensure they were compliant with the new regime.
Mr Johnson believes Australian companies’ reaction to the roll out of the tax highlighted the need for Australian companies to increase their engagement with people on the ground.
«It was so clear that for the most part they really didn’t know that these changes are coming, and to the extent they did know, they really didn’t understand anything about what the likely impact was going to be.
«Given the fact China is now our largest trading partner and increasingly it is not just iron ore or coal, but food and agriculture, which involves thousands of people along the supply chain.
«I have to say these shocks — as we have tighter integration with China, and as they buy more Australian produce — will be increasingly important for Australian companies to understand what’s going on over there, or face off the problems as they come up.»
In the long run, Mr Johnson anticipated the e-commerce tax would not have a major impact on Australian exports to China, but there was a good chance its design would change over the next year.
Source: ABC
