The growing Chinese tourist class has proven, in recent months, to be one lucrative pot of change for Chinese mobile payments firms. With good reason as well; those who have time and cash enough to go traveling are likely to spend that cash in good amounts. Those who spend mean cash to the payment processors, so the pursuit of same has been brisk. However, there’s one problem that the Chinese mobile payments systems likely didn’t account for: tax evasion.
According to a report by Payment Week news channel It turns out, according to recent reports, that the growth of Chinese mobile payments systems is proving particularly useful in Vietnam to get around taxes. This is especially true for Chinese-owned stores operating in those countries, the reports note, and thanks in large part to what are called “zero-dollar tours.”
The “zero-dollar tour” is a tour that’s offered at low prices to Chinese consumers, often below cost. It’s used as a loss leader of sorts and supplemented by “forced shopping” at certain stores in foreign destinations. The tourism destinations don’t get much out of this, since the certain stores in question are controlled by Chinese companies.
In Vietnam in particular, this is a big problem; since the “forced shopping” stores are Chinese-controlled, using Chinese payment processors, the firms partnered with Alibaba and Tencent get nothing. This not only cuts out the Vietnamese government from taxing the retail that the local stores generate, it also hurts data gathering operations that would reveal just how much shopping the Chinese are doing in Vietnam.
Basically, the Chinese have created a closed-loop system that keeps local partners out of the mix, a development that local partners will likely not be at all happy about. Vietnam is trying to combat this by encouraging Chinese tourists to ensure they’re shopping at outlets that offer legal Alipay and WeChat Pay transactions, but that’s almost like encouraging car buyers to ensure that car makers are following all applicable laws. Chances are the tourists have no idea, and wouldn’t be that interested anyway. They’re paying the bills, and that’s where the bulk of their involvement ends.
It’s not a good situation all around, but one that demands a solution of some kind. The solution, however, may end up more painful than the problem.
By: Steven Anderson