Have you ever made an online purchase through eCommerce merchants?

man_holding_globeIn honour of World Consumer Rights Day 2018, we thought we would take the opportunity to share with you what is happening with regards to value-added taxes (VAT, HST, Sales Tax, GST) and how this affects the you as a citizen of your country.

In 2017 1.66 billion people worldwide purchased goods online. It is projected that by the year 2021 over 4.48 trillion U.S. dollars will be spent in global e-retail sales. Have you ever wondered where that money goes and who is benefiting from the taxes collected or why you don’t have to pay taxes at all?

 

How VAT/Sales Taxes are being collected today:

After a consumer makes on online purchase for a product or service, the sales taxes are traditionally included in the purchase. The payment processor or credit card company collects that payment including the purchase price, taxes and shipping and handling fees and redeem them back to the Merchant who disrupted the goods or services regardless of their location. This means a retailer located outside of your country is responsible for remitting those taxes back to your government.

 

Seems pretty straight forward, right? Realistically, this is not necessarily the case. With over 10 million ecommerce merchants online and new retailers opening up shop every day, the risk for fraud and unregistered businesses has now increased exponentially compared to the past. A great proportion of these online retailers are not held to the same standards of business as a retailer or store front around the corner from you. In most countries opening a business takes time, money, man power and registered address.

Online retailers are not held to the same jurisdictional requirements and can open shop in one day with no employees. Companies can access worldwide markets without being an accredited business, meaning the good and services taxes used to maintain your countries economy are now going somewhere else or disappearing entirely. It means the products you receive can be fraudulent, fake, misrepresented or not show up at all. This creates the Virtual Risk, where our story truly begins.

A look at how the Virtual Risk could be addressed around the world:

 

As stated in the video above we need laws to be applied to everyone in the same way, regardless of the country of origin. At Netsweeper we believe it is your right as the consumer to understand where your money is going and how you can ensure you are receiving a reliable resource online.

Here are 3 ways you as a consumer can get involved:

#1: Be aware of fake goods and always be on the lookout for counterfeits.

Over 25% of online goods are bad for you as the consumer or fraudulent. Some online retailers will impersonate well-known brands when in reality they are cloaked companies using another brands logo. Use online platforms like www.counterfitreport.com to check for the latest reports of fraudulent goods and services.

#2: Remember your local market place.

Online shopping drastically affects your local market place. It may be convenient or cheap to order something through one of these merchants, but it is not guaranteed that the revenue will be put back into your country and economy. Supporting local businesses that offer courier services or online shopping is a great way to ensure your purchase will arrive on time, is what it says it is and could keeps employees employed.

#3: Contact your Finance Minister to help lobby for fair online trading.

Change in Legislation is needed. This will allow government bodies to procure tools that will enable governments to manage this Virtual Risk. Governments need to protect their citizens tax dollars and take on the responsibility of tax and data collection and collect the revenue themselves. Jobs are at risk with eCommerce taking on the brick and mortar retailers. Speak to your local MP or contact your finance minister and request information regarding how they are tackling this problem.