Prison sentences for Taobao vendors stir debate

SHANGHAI - Chinese people are questioning China's high luxury taxes online after two people were sentenced to one year in prison with a one-and-a-half year reprieve for smuggling goods from overseas and selling them online.

The two vendors were caught in April and May, respectively, last year at the Pudong International Airport in Shanghai when they returned from South Korea with hundreds of watches, handbags and cosmetics without declaring them.

Both of them planned to sell the goods on Taobao, China's most popular consumer-to-consumer sales platform.

People have blamed high taxes on luxury goods for the increasing number of online vendors who have taken the risk of bringing goods into the country illegally.

"China collects a 10-percent customs duty, a 17-percent value-added tax and a 30-percent consumption tax for a European cosmetics product worth $400. That's roughly 2,000 yuan, or 80 percent of the original price," said Wang Weiqing, a professor at Shanghai Jiaotong University.

"Baby formula sells for more than 30 percent higher in China than in countries like the Netherlands. That's why I've been buying baby formula from Taobao for the last two years," said an online shopper surnamed Zheng.

"It's a win-win situation for Taobao vendors and customers. We get luxury goods at a much lower price and vendors earn a living as purchase agents," she said.

Research done by the China Electronic Commerce Research Center showed that the market for overseas shopping services reached 48.3 billion yuan (about $7.8 billion) in 2012, increasing 82.2 percent year on year. The figure is expected to reach 70 billion yuan this year.

A blogger named "smilence" said the size of the market shows that although demand has increased for imported goods, it takes time for consumers to adjust to the higher prices.

Some people worry that Taobao vendors and customers may subsequently enter legal disputes.

"I hope Taobao vendors will learn a lesson from the two people who were sentenced to one year in prison. They should not evade taxation for higher profits," said "Dajie Mars."

A blogger using the screenname "Ayuan" said customers risk buying fake products with the help of overseas purchase agents.

"Where do I return goods of inferior quality? I didn't buy the item in person from a shopping mall. The vendor could say he was not responsible for the item's quality because he only bought it on my behalf," said "Ayuan."

"The government should better regulate Taobao and provide guidelines for vendors and customers to settle such disputes," "Ayuan" added.

Lu Xiao, a professor at Fudan University, said shopping malls in China should adjust their marketing strategies and offer more discount options to retain customers.

"The government should set up more duty-free shops and lower customs duties in order to encourage more people to shop in China," said Lu.