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Russia to equalize conditions for online and retail trade

December 17, 2013, 12:13 UTC+3
PricewaterhouseCoopers estimates that Russia’s online trade market has increased from $3.5 billion in 2008 to $10.4 billion in 2012
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MOSCOW, December 17. /ITAR-TASS World Service/. The Russian authorities are set to keep a close watch on online trade companies. For this purpose they will have to equalize conditions for traditional retail and online trade. Russian presidential aide Andrei Belousov was quoted by Rossiyskaya Gazeta as saying that there were no plans to toughen the conditions, but explained that there would be “simple adjustment of rules” for ordinary and online trade.

PricewaterhouseCoopers estimates that Russia’s online trade market has increased from $3.5 billion in 2008 to $10.4 billion in 2012, while Morgan Stanley forecasts that by 2015 Russia’s e-commerce market will grow to $36 billion, making up 4.5% of the total retail sales, Kommersant reports.

There are around 30,000 companies operating on Russia’s e-commerce market, most of them violate legislation, said Alexander Zhigulin, executive director at the Association of Online Trade Companies. “Most of illegally imported goods are on sale in the Internet. The price for them is significantly lower than that for legally imported goods, first of all through evasion of a value added tax and customs duties,” he said.

The situation worsens against the backdrop of more than a two-time increase in transborder trade, up to 100-120 billion rubles ($3-3.6 billion), year-on-year and active use of this channel by illegal entrepreneurs. According to the Association of Online Trade Companies’ estimates, in 2013 the Russian budget has already lost around 30 billion rubles ($913 million) from illegal movement of goods through the customs border.

The government’s task is to take the “grey segment” of small online retailers into legal frames, what big players of the market support, a representative of one of Russia’s biggest consumer electronics retailers M Video, Anton Panteleyev, says. “At the same time for companies that observe laws there is no difference between online and offline sectors. These are simply different channels of sales,” he said.

Up to eighty percent of players on Russia’s e-commerce market work by “black” or “grey” schemes, says Sergey Rumyantsev, CEO of Enter.ru. Entrepreneurs widely use duty-free import of goods and make wholesale purchases as individuals, evading a value added tax and customs duties. As a result, unfair players of the market get 30-40% in price advantages. “If according to the forecasts, this year’s online trade market reaches 0.5 trillion rubles ($15.2 billion), the budget will lose dozens of billions of rubles,” Rumyantsev said.

 

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