Taxation on E-Commerce: Evidence from China’s Retail Sector

Jiong Gong, Ping Jiang, Jin Yu, Xiangyang Zhang  
(University of International Business and Economics, China)

Abstract: This paper presents a study on the distribution of tax liability across China’s retail industries. Specifically, it deals with three types of taxes: sales tax, value added tax and corporate income tax. Our data includes three categories of firms: pure e-tailers, hybrid retailers and traditional retailers. We find substantial differences in tax liabilities among the three types of retailers. In general, in all three types of taxes, hybrid retailers with e-tail platforms incur lower tax burdens than do traditional bricks-and-mortar retailers. But contrary to conventional wisdom, pure e-tailers actually incur much higher effective tax rates on their incomes than do the other two types of retailers.

Key words: income tax; VAT; sales tax; e-commerce; China

JEL codes: H26, D22, M48