The End of Cheap Shopping? How SARS crackdown on Temu & Shein will hurt SA shoppers

South Africans, does shopping on Temu make you 'feel like a billionaire' for a fraction of the cost?

Do those R50 dresses and R80 pants on the Shein sale make you feel like you thatha ma-million?

That may change, if SARS can help it.

Those who enjoy buying cheap and affordable clothes online without paying taxes will feel the rampage of SARS, as the fight between SARS and online retailers will directly hurt them.

Chinese online retailers, including Temu and Shein, have been in the firing line in recent months for using tax loopholes to undercut South African competitors.

They are accused of abusing the de minimis* rule to get clothing parcels of under R500 through customs with a 20% import duty and 0% VAT.

*The de minimis tax rule used to allow small online purchases under R500 to be taxed only at a flat 20% customs duty, without VAT. However, from September 2024, the rule changed, and now these purchases are also subject to an additional 15% VAT, making imports more expensive. This means an R500 item now costs R675 after taxes, impacting shoppers buying from international platforms.

Shein and Temu are accused of breaking up larger orders into smaller quantities and packages to ensure they are under R500, which is unfair and illegal to South African clothing retailers.

Once they have benefitted from the lower 20% tax, they combine these orders again before shipping them to clients. However, consumers also benefited from this act by underpricing goods without tax.

These companies are accused of not paying duties on their imports and are avoiding paying VAT where it should be applied, which leads to our local retailers suffering as they face stiff competition.

Local online retailers like Takealot reported soaring digital advertising costs to keep up.

The state estimated that it lost out on more than R3 billion in unpaid taxes and is actively addressing this problem.

However, a SARS commissioner admitted that they are playing catch-up on updating its tax rules and administration processes to collect taxes from these platforms and their users.

The new changes mean South African shoppers can expect to pay more for their Shein and Temu orders (when two elephants fight, grass suffers). South African citizens will be the ones who will pay the ultimate price for this fight.

However, Shein and Temu denied that they were dodging tax. They emphasised that their low prices were due to their business models, which enabled them to produce products directly from factories or suppliers in China.

E-commerce craze

In South Africa, It is estimated that e-commerce is worth R225 billion. From ideal prices to accessibility, there are many reasons driving people to shop online.

In turn, malls and shopping centres aren't happy about these new consumer habits. In 2024, two of the largest malls in South Africa, Fourways Mall and Brooklyn Mall, reported a decline in vacancy rates - retailers are seeing no profitability in brick-and-mortar stores.

Shein has seen around 250,000 South African shoppers since they arrived in the country in 2020.

Other legal concerns

Shein/Temu customers have reported concerns about the safety of the products for sale on their websites. In Europe and the US, reports of allergic reactions surfaced online, leading the relevant authorities in the EU to find that these products exceed the legal limits of certain chemicals.

Consumers also discuss ethical concerns - Accusations of exploitative labour practices raise questions about whether or not individuals will support companies with these accusations. Consumers are torn in a country with some of the world's most progressive labour laws.

SARS, Shein and Temu should settle their differences to serve South African consumers with a profitable solution.

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