Could a tax hike put an end to Asian retailers?

It is not new that Brazilian retailers, such as Renner (LREN3), Magazine Luiza (MGLU3) It is Havanain Luciano Hangcomplain about the taxation of foreign players, especially Asian ones, such as Shopee It is Shein.

To the XP Investimentosif this occurs, foreign companies may suffer significant losses.

Brazilians ask for more rigorous inspection of these platforms, since cross-border purchases (cross-border trade between two countries) below US$ 50 made between two non-commercial individuals are exempt from taxes.

Currently, he recalls, a significant part of the GMV (gross value of goods) generated by foreign platforms falls within the limit of US$ 50, which is exempt.

However, Brazilian companies argue that Shein is not a P2P platform and therefore should be taxed regardless of the order value, leading local retailers to demand an updated regulation from the authorities, arguing that the government is leaving up to R$14 billions in back taxes annually.

“If the tax is approved, cross-border purchases may lose the main appeal of consumers, since we estimate that prices of the Shein are 50%-64% below LREN, GUAR, CEAB It is hering“, say analysts Danniela Eiger, Thiago Suedt and Gustavo Senday.

Both platforms, Shopee It is Sheinalready account for a turnover of more than R$ 10 billion in the country.

Another obstacle

In addition to the tax issue, the XP points to another problem for foreign e-commerce platforms: the development of local operations (suppliers, sellers, logistics).

“In this sense, despite the possible taxation of international platforms being on the agenda again, we believe that the competitive scenario for e-commerce platforms and middle-income retailers will continue to be challenging, while we see the capillarity of physical stores and logistics as competitive advantages for local players”, he says.