EU Commodity Taxation Reform: Protecting Domestic Industries or Restricting Trade? Exploring the Impact on Small and Medium Enterprises

Protecting domestic industries is one of the challenges governments commonly face in international trade. Recently, the EU proposed a reform bill to impose tariffs on imported goods valued below 150 euros, aiming to respond to the rapid growth of e-commerce and prevent tax evasion and abuse of fraudulent practices. This reform has sparked some discussion about whether domestic tariffs on European goods should also be raised to protect domestic industries.

According to EU statistics, customs duties, value-added tax, and excise taxes amount to 80 billion euros annually, and the failure to tax goods valued below 150 euros has already caused a tax revenue loss of about 1.5 billion euros. These figures demonstrate the importance of taxing imported goods in order to safeguard national tax revenue and a fair competitive environment.

At the same time, according to an official EU survey, up to 65% of imported e-commerce products currently have issues with tariff avoidance, under-declaring prices, resulting in reduced revenue for EU customs. The implementation of these reform measures will help resolve the issue of tax declaration for imported goods and provide EU customs with more tax resources, expected to increase revenue by 1 billion euros annually.

However, this reform faces challenges, because the EU’s 27 member states have different foreign trade policies and tax administration mechanisms. Harmonizing tariff policies and information sharing among them is an arduous task. To solve this problem, the European Commission plans to establish a customs data center to ensure that customs officers can track the declaration and payment of imported goods, and will prioritize piloting a digital transaction system starting in 2028. This will enable customs officers to monitor in real time the situation of imported goods within the EU and detect goods with fraud risks, illegal smuggling, or non-compliance with safety regulations. This will not only simplify paperwork and procedures but also reduce the time and cost required for enterprises to clear customs, estimated to save 2.7 billion euros in expenses.

This situation of the EU unilaterally imposing additional taxes on goods makes us need to consider whether our own country needs to respond in a timely manner, for example by raising tariffs on European goods to protect domestic industries. Raising tariffs can hinder the inflow of imported goods, thereby protecting the competitiveness of domestic industries. However, a careful balance is needed to avoid excessive restrictions and retaliatory measures against international trade. Domestic governments should assess the country’s industrial structure and competitive environment and engage in dialogue and consultation with other countries to find the best solution that both protects domestic industries and promotes fair and sustainable international trade.

Finally, domestic business operators should pay close attention to possible changes in international trade policy arising from this taxation issue, understand the relevant tariff regulations and legal requirements, and adapt to these changes to ensure the smooth operation of their businesses. At the same time, they should also assess the demand and competition in international markets and seek innovative and diversified development strategies to maintain competitiveness and sustainable development.

The above is an overview of Europe’s reform to tax low-value imported goods, as well as a discussion of whether the domestic country needs to raise tariffs to protect domestic industries. This issue has an important impact on the owners of small and medium enterprises in the Republic of China (Taiwan) that export goods to Europe, so they need to pay close attention to relevant developments and take appropriate response measures.