Alibaba's IPO: Raising the eyebrows of China Taxation Bureau

Alibaba - China's largest e-commerce business - made headlines worldwide when it went through a record setting initial public offering (IPO) on 19 September 2014. On the third trading day, Alibaba made another world's headlines; this time, claiming the title as the world's largest IPO with extra share sales. Alibaba's IPO has definitely raised the eyebrows of the China Taxation Bureau. China is now considering launching its first taxation of the country's massive e-commerce market. An intensive research is said to be carried out by the China Taxation Bureau to study a policy framework on how to tax e-commerce. As part of this move, the Chinese government may extend the use of a nationwide "e-invoice" system next year and begin collecting the required data to establish a tax regime. At the moment, "e-invoice" system is only used in a few regions of China and only by a few online retailers, such as Yixun.com, JD.com Inc and Tencent Holdings Ltd. The potential taxation regime might not be good news to China's emerging e-retailers, including the large number which use Alibaba. According to Alibaba's founder, Jack Ma, some 94% of online vendors on Alibaba's Taobao site don't need to pay taxes as their revenues are too trivial. In an interview with the state broadcaster CCTV, Ma said that Alibaba supported the taxation of e-commerce as he "always think, and firmly believe, it's unethical for companies not to pay taxes" (Marketwatch, Aug 2014). He also said that "the entire society has made a huge contribution to your company, and provided supporting facilities to you. If you don't pay taxes, it's not only illegal, but also unethical". As Alibaba's IPO debut makes a splash in the US stock exchange, e-retailers of Alibaba back home in China share an ironic joy of pride and concern, well aware that China Taxation Bureau has also made a debut into the potential e-commerce tax regime.