China targets online vendors in tax crackdown

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Chinese authorities are collecting more taxes from online sellers as part of a crackdown sparked by Beijing’s desire to boost revenues to make up for slowing economic growth.

Since a new law took effect in October, platforms such as Alibaba, Shen and Amazon have provided data indicating merchants’ earnings, including names, orders, sales and virtual gifts or digital tokens, according to documents released by local tax offices.

More than 7,000 e-commerce platforms reported tax-related information by the end of the third quarter, Lian Qifeng, tax director of the State Tax Administration, said at a press conference in December.

He said this contributed to a 12.7 percent increase in tax revenues from e-commerce platforms in the third quarter compared to the previous year. He did not provide a total figure.

With the Chinese economy expanding at its slowest pace in a year in the third quarter, the authorities are keen to confront the effects of the US trade war and the continuing contraction in the real estate sector. The collapse of land sales and slowing economic growth have also increased pressure on Beijing to find new sources of financial revenue, including from merchants and live streaming on online platforms.

The state tax administration has launched several campaigns to boost collections, including pressuring mainland investors to pay 20 percent taxes on their global capital gains. It also cut incentives in areas blamed for fueling excess industrial capacity, and launched a nationwide crackdown on evaders who inflated bills to claim fraudulent rebates.

Online sales of physical goods reached RMB12.8 trillion ($1.8 trillion) in 2024, nearly 27 percent of China’s total retail sales, according to data from the National Bureau of Statistics, but analysts say their share of taxes is often lower. While submitting sales data has been mandatory since 2019, implementation has been lax and the new law sets clear deadlines for submission.

Lian said the tax authorities issued repeated reminders to sellers whose declared income was significantly lower than the amounts reported by the platforms. This “has significantly narrowed the tax burden gap between online and offline merchants,” he said.

“Data-driven taxation has become the ultimate weapon in the authorities’ toolkit,” said Quan Kaiming, a partner at the Shanghai-based law firm Albright, adding that the rise of the platform economy has shaken traditional tax administration.

Quan said the new tax reporting rules helped bridge the gap, promoting fair competition, but also increased compliance costs and data security risks. “The tax risks are particularly high for influencers and streaming platforms,” he added.

For merchants whose current profit margins are slim, the higher value-added tax — 13 percent for companies with sales exceeding RMB5 million — could be devastating.

“This will kill us all,” said an Amazon source in Quanzhou named Huang, whose online sales of household goods and toys to overseas customers can reach 200 million renminbi a year. “We didn’t pay any taxes before, and this is the biggest benefit of selling online.”

“The average profit margins on Amazon for sellers are about 8 percent, and rarely does anyone exceed 20 percent,” Hwang told the Financial Times. “It is absolutely unreasonable for cross-border traders like us to pay a tax of up to 13 percent.”

Zeng Jianwei, a Guangzhou-based merchant who sells pet goods on Amazon, also expressed concern. “Business is really bad… My sales are down 20 to 30 percent [in 2025]And now it’s likely to get worse.

Zeng said his strategy was to wait and see. “Maybe after the tax office reaches its quota for collecting from large sellers, they will deal with us easier.”

Amy Lin, a sales manager at one of Shein’s shoe suppliers, expects most sellers to increase prices. “The e-commerce industry has not been in very good shape.”

Alibaba, Shen, and Amazon did not respond to requests for comment.

Additional contributions from Qing Ling and Tina Hu in Beijing, William Langley in Guangzhou and Rafi Rosner Odin in San Francisco