After days of pressure from Asian retailers and consumers on social networks, Finance Minister Fernando Haddad decided to back off the end of the exemption from taxation on international orders between individuals worth up to US$50.
The import tax is 60% for purchases on foreign websites.
“The president [Lula] asked us yesterday to try to solve this from the administrative point of view. That is, to curb smuggling.”
“We know that there is a company that practices unfair competition, damaging all other companies, both in e-commerce and the stores that are open there, suffering unfair competition from this company,” said the Finance Minister to journalists on Tuesday (18), according to Agência Brasil.
With an eye on a potential extra revenue estimated at US$8 billion a year and in response to a long-standing claim of Brazilian retailers, under the allegation of unfair competition, the Ministry of Finance and the IRS had announced a week ago the end of the import tax exemption for orders from individuals up to US$50.
The measure would affect large Asian e-commerce companies that sell in Brazil, such as Shopee from Sea, Aliexpress from Alibaba, and Shein.
According to accusations from Brazilian retailers and the Internal Revenue Service, such companies manage to evade international taxation law by sending fractional packages as if they were individuals.
Haddad reiterated that the government would no longer tax these imports at the request of President Lula.
In a conversation with journalists, Haddad said that the president of the Republic asked for this to be solved from the administrative point of view with increased inspections.
“President Lula said that] this was creating confusion because it could harm people who, in good faith, receive orders from abroad up to this level, which is an old rule,” said Haddad, also according to Agência Brasil.
Since the taxation announcement, users who do not want to pay taxes on these purchases have criticized the PT government on social networks.
It even triggered influential supporters to explain the reasons for taxing purchases up to US$50, according to Folha de S. Paulo.
The retreat from the decision to tax, denied yesterday (17) by the Secretary of Revenue, Robinson Barreirinhas, comes days after President Lula visited China, where he met with the president of the world’s second-largest economy, Xi Jinping.
Two of the biggest companies that would be affected by the taxation are from China: Shein and AliExpress.
The imports of small-value products reached US$1.5 billion in the first two months of 2023, the highest value recorded in the last three years, according to data from the Central Bank mapped by Vixtra, foreign trade fintech.
ASIAN COMPANIES FOCUS ON BRAZIL
The E-commerce Sectors report from Conversion estimates that Shein had 69 million hits in February 2023, against 72 million from AliExpress and 138 million from Shopee.
Shein is a Chinese retailer that operates on the fast fashion model, meaning that it produces low-cost clothing collections quickly in response to the latest fashion trends.
In March, it opened a temporary physical store in a mall in Salvador, one of the company’s main markets in Brazil.
Shein said it is betting on Brazil as a strategic market in Latin America, where the company has seen “exponential growth.”
The retailer already made an initiative for temporary physical stores in Rio de Janeiro and Sao Paulo in 2022.
In late January, the marketplace announced the appointment of former SoftBank CEO Marcelo Claure as president of Shein in Latin America.
Claure oversees the company’s Latin America strategy and stakeholder affairs in the region and is leading the formation of an advisory board for Latin America. He has also invested US$100 million in the retailer.
Shein’s general manager in Brazil is Felipe Fistler, previously e-commerce leader for Latin America at Asian competitor Shopee in Singapore.
Claure visited Brazil last month when he met with the vice president of the Republic and Minister of Development, Industry, Commerce, and Services, Geraldo Alckmin, and the president of the Central Bank, Roberto Campos Neto.
Shein says it has global offices and reaches customers in more than 150 countries.
On Tuesday (18), the company announced opening its first office in Brazil, at Brigadeiro Faria Lima Avenue, in São Paulo, to “consolidate its local operation and strengthen its performance in the domestic market”.
SimilarWeb data presented in a report by BTG Pactual show that in February 2023, Shopee had an 11% share of daily website visits, against 23% for Amazon and 34% for Mercado Livre.
Brazilians Magazine Luiza and Americanas had 14% and 6%, respectively.
According to experts, if the inspection is exclusively for imported products, the measure could hit AliExpress and Shein more than Shopee, which said it has more than 3 million Brazilian sellers and that more than 85% of sales are from local sellers.
“Shopee supports digital entrepreneurship in Brazil and any effort that contributes to that purpose,” the company said in a statement.
“We will continue to follow local laws and regulations and require sellers on our platform to comply with them as well.”
“We want to contribute to the country’s ecosystem development,” Shopee said.
AliExpress, which has Brazil among its top five markets, has been making a move to seek to attract Brazilian sellers with local sales for a year, but cross-border e-commerce is still more significant for the Chinese platform.
With information from Agência Brasil