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Market Avenue

UPDATED: August 23, 2010 NO. 34 AUGUST 26, 2010
Should Online Businesses Be Taxed?

Not ready yet

Lian Hongyang (Guangzhou Daily): There are various reasons for the online business boom. For sellers, there are low market access threshold and flexible operational models. For consumers, there are a great range of products, lower prices and home-delivery services.

Lower prices are a major advantage for online businesses in attracting consumers. The rapid development of e-commerce has encouraged greater numbers of youth to start up business on the Internet, which is significant in boosting domestic demand and creating jobs. Every coin has two sides. Even if the government sets a 4-percent value-added tax rate, it would still be a fatal blow to this low-profit industry. Most online business operators will quit because they cannot make money any longer. If they shift the increased cost to consumers, their commodities will be less competitive in the market.

Considering its significant role in enriching netizens' lives and providing employment for youth, it's necessary for the government to give incentives to budding e-commerce, including preferential taxation. Besides, growing fiscal revenue enables the government to exempt taxes on online businesses.

Zhao Yong (Western China Metropolis Daily): It has been several years since the inception of e-commerce in China, but the online market is not strong as a whole. Under this circumstance, policies concerning online businesses should put more emphasis on giving full play to their role in creating jobs and relieving the impact of price hikes on consumers, rather than on taxing them.

In 2009, businesses on taobao.com, China's largest online consumer-to-consumer marketplace, realized total trading volume of 200 billion yuan ($29.41 billion) and created more than 800,000 employment opportunities. They also brought along more than 2.3 million jobs in logistics, payment and other service sectors. After the global financial crisis broke out, the government took a lot of measures to help small and medium-sized enterprises overcome difficulties, including reducing their tax burdens. It should also give taxation incentives to online businesses to boost their development.

Recently, people have become very sensitive about rumors of taxing online businesses. The rumors haven't become reality but have solidified people's belief of regulations coming along with taxation. It's the fundamental basis for people's fear the "real-name registration system" for online businesses will soon bring taxes.

Taxing online businesses, and all other taxation activities, should only be consented to after full discussion. Is now the right time to tax online businesses? Will the disadvantages be greater than the advantages? The answers to all these questions will only be found in discussion.

Liang Fafu (China Youth Daily): Online businesses attracted lots of consumers due to their lower prices since they don't have the burden of paying taxes. It is a win-win situation for sellers and buyers.

Paying taxes is the obligation of citizens and enterprises. But, in practice, industries can enjoy preferential taxation based on political, economic and social needs.

China's employment situation is grim now, especially where college graduates are concerned. If some of them start up business online and are therefore able to support themselves, it surely reduces the pressure on the government to create jobs. Now that the government can support large enterprises in transportation and power industries by tax reduction and exemption, why can't it let online businesses, which play an important role in boosting employment and reducing living costs of consumers, enjoy the same benefits?

Recently, along with growing revenue, there have been greater calls on the government to reduce taxes to benefit ordinary people. Preferential taxation for online businesses is good for both operators and consumers, most of whom are low-income earners. It will also help the government realize the goal of adjusting income distribution.

Wu Jiang (www.eastday.com): Taxing online businesses is difficult in foreign countries, also. Take the United States as an example. In order to judge whether an online business is taxable, U.S. taxation authorities have listed as many as nine indexes, including whether the operator relies on it for a living, whether it acts in a commercial way and the amount of time the operator spends on it. Even so, these indexes are still vague and it's hard to make a judgment.

Some people run online businesses out of personal interest or for the purpose of sharing good things with others. But it's actually hard for us to make a distinction between them and for-profit business operators. In order not to impact the former, taxing online businesses must be handled cautiously.

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