Alibaba shrugs off retailers' tax cry

Updated: 2014-12-03 12:12

By Lian Zi in San Francisco(China Daily USA)

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Alibaba on Tuesday responded to criticism by brick-and-mortar retailers in the US that are asking Congress to tax online retailers such as China's online e-commerce giant.

"The Alibaba Group pays its taxes according to the laws in the country it does business in and the US is no exception," the company said in a statement to China Daily on Tuesday. "The Alibaba Group remains focused on providing US-based companies the opportunity to bring their products and services to the Chinese market through our various online properties."

The Alliance for Main Street Fairness, including US "big box" retail chains Best Buy Co, Inc; Bed Bath & Beyond Inc; JC Penney Co Inc, Target Corp and others, called on Washington to end special tax treatment for Alibaba and other online retailers - including US giants Amazon and eBay - warning that Jack Ma's company will hurt local retailers and even the US economy.

"Until federal legislative action is taken to equalize the treatment of remote online sellers with local brick-and-mortar merchants, China's largest company will grow ever richer at the expense of domestic wholesaler-distributors and retailers whose very existence will be threatened along with the jobs they provide," the statement said.

Many traditional US retailers support the Marketplace Fairness Act of 2013, which was passed by the US Senate but not the House of Representatives, to impose sales and use taxes on online retailers. The legislation's fate remains uncertain, now that a new, Republican-controlled Congress will be seated in January.

During Black Friday shopping Nov 28, US retailers Saks Fifth Avenue, Neiman Marcus, Bloomingdale's, Macy's, iHerb, Gilt, Ashford, Ann Taylor, American Apparel and Aeropostale teamed up with Alipay to enable online shoppers in China to purchase goods on their US websites. The US retailers saw a jump in sales from the promotion.

"Alibaba has helped my business because it has helped save money on my purchases," said Alex Felder, who imported fake and natural hairs from AliExpress for her hair-extension business in Atlanta. "The advantage of AliExpress for me is that I can buy in larger quantities if I wish to. My shopping experience on the site has been very easy.

"I also use eBay to make purchases, but generally don't get discounts with larger purchases, and eBay isn't really a friendly site to me for making purchases in bulk," she added.

Zheng Yuhuang, a marketing professor at Tsinghua University in Beijing, told China Daily that it is too early for US retailers to worry about Alibaba's expanding in the US, because it is not easy for foreign players to make inroads in unfamiliar markets.

If Alibaba wants to compete with local retailers, they must understand the needs and shopping habits of US consumers to overcome cultural barriers, Zheng said.

"The final winners must be the enterprise that could provide highest value to local consumers," he said.

Traditional retailers have long taken aim at online retailers' tax advantage and have targeted Amazon before, said Wang Xiao, CEO of Innospring, a high-tech incubator in Santa Clara, California.

"When any major players are threatened by a new competitor, their first reaction is to find solutions based on the legal system," said Wang. "It is totally understandable."

"But I believe that Alibaba will follow the laws and rules when expanding business in US," Wang added.