[Politics] Tax: how will VAT be for purchases on platforms like Amazon?

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a store established in Colombia that sells toys from the multinational Mattel such as Barbie, Hot Wheels or Fisher Price and another that sells sports shoes such as Nike, Adidas or Reebok pay 19 percent VAT at the time of sale; however, if these products enter the country via e-commerce platforms such as Amazon, they do not accept it when the orders are worth less than 200 dollars.

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Current legislation allows these platforms not to pay VAT when they are products sold from the United States to Colombia under the modality of postal traffic or urgent shipments whose value, not including delivery costs, is equal to or less than 200 dollars, a situation that Colombian merchants qualify as unfair because
—they say— it generates “unfair competition” for companies and they want the rule to be changed in the tax reform being discussed in Congress.

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Given this, unions such as Fenalco, the Colombian Chamber of Clothing, Acopi and Acecolombia have repeatedly expressed their concern to the Government, as they say that this benefit generates a fiscal gap, in addition to impacting the industry and employment. Likewise, it facilitates technical smuggling and allows triangulation, that is, products from Asian countries enter without VAT through the United States.

By not paying taxes, goods can reach the hands of consumers at a lower price than the local price, and with the expansion that this market could have in the future, the threat could be greater.

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Does Amazon pay VAT in Colombia?
Previously, all packages that entered the country for less than 200 dollars did not pay VAT or duty, thanks to the commitments assumed in the free trade agreement (FTA) between Colombia and the United States. However, the exemption applied to products from all countries, that is, they benefited from Amazon to China's AliExpress.

For this reason, in last year's tax reform led by former Minister José Manuel Restrepo, what was changed is that only small packages that come from the United States remained exempt from VAT.

However, merchants continued to claim that most of the products that come through Amazon such as clothing come from the United States, but are made in Southeast Asian countries, that is, there is a triangulation.

In order to control this problem, in the tax reform project of the new government of President Gustavo Petro that was presented on August 8, what was done is to propose in article 66 that only products actually made have the VAT exemption. in the United States (not just that they proceed) and that the Dian was going to establish the proper control controls to ensure payment.

“The word origin should be changed to originating because although the trade agreement is with the United States, today as the rule is, we are being allowed to be a duty free 365 days a year for the rest of the countries,” said Camilo Andrés Rodríguez, President of the Colombian Chamber of Clothing and Related.

Rodríguez says that although a businessman in Colombia who manufactures knitted shirts must pay a 15 percent tariff on his imported raw material plus 19 percent VAT at the time of sale and 1 percent ICA, which comes from Amazon does not have these taxes.

With this, they could no longer enter without VAT, for example, products 'made in Bangladesh' sold through Amazon. In addition, the electronic commerce platforms would have the responsibility to inform the origin of the products.

Later, in the discussion between the speakers of the reform and the Government, the director of the Dian, Luis Carlos Reyes, acknowledged that this article created operational difficulties for the Dian because it is not possible to adequately control the products that actually originate in the United States. and that other alternatives were being analyzed to eliminate this distortion.

At the moment, in the first presentation of the debate, article 66 of the filed bill was eliminated that modified literal j) of article 428 of the Tax Statute. This means that we would return to the beginning, since that literal was the one that only allowed the exemption to the countries with which Colombia has a commercial agreement.

“It would not be consistent that while taxes are raised on individuals and companies to cover high social needs, exemptions are maintained for cross-border electronic commerce platforms. Currently, commerce and industry together represent more than 30 percent of employment in the country, and VAT is one of the main tax revenues”, warn Acecolombia, the Colombian Chamber of Clothing and Fenalco in a joint statement.

What do the Colombian unions propose?

The Colombian unions say that the Government currently has two possibilities to correct the law by taking advantage of the tax reform.

On the one hand, put VAT on all cross-border e-commerce that enters the country; on the other, maintain the VAT benefit only for products originating in the United States, that is, products that are actually produced in that country.

Acecolombia, the Chamber of Clothing and Fenalco assure that it is not true that Colombia was forced by the FTA not to charge VAT on products from all countries of the world of less than 200 dollars for the simple fact of being dispatched from the United States.

Likewise, they affirm that the Dian could control the origin of the products that enter the country.

“The way to deepen electronic commerce in Colombia is not by giving tax advantages to US platforms. We invite the country to be rigorous in the analysis of the information for this transcendental decision, around which all Colombians must be united”, they concluded.

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The position of the United States
For their part, different businessmen from the United States sent a letter to the Government of that country warning of "serious concerns" about the recent tax reform bill that contains new requirements for companies that invest and export to Colombia.

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Precisely, one of them is that the bill would eliminate the special treatment for VAT payments on imports of 200 dollars or less.

According to the letter, the effects of this violation would be detrimental to the interests of the United States and they assure that this decision would suppose an effective increase in VAT prices of 19 percent, an added cost in a time of already high inflation, reads in the letter.

“These new costs will affect US exporters, especially small and medium-sized companies that ship to Colombia. If implemented, this change will harm American SMEs and their employees, who already face a series of challenges, such as high levels of inflation, ”say the American businessmen, who sent the letter to Janet Yellen, secretary of the Treasury of the United States and other officials of the Government of that country.

https://www.eltiempo.com/economia/sectores/reforma-tributaria-como-quedara-iva-para-compras-por-internet-en-amazon-713053