Regulation for online traders

Balancing entrepreneurship and consumer protection is critical for social media trading

Given the sheer number of people who use social media on a daily basis, it makes perfect sense that some eager entrepreneurs use its platforms to sell their wares. Dado Ruvic / Reuters

Given the sheer number of people who use social media on a daily basis, it makes perfect sense that some eager entrepreneurs use its platforms to sell their wares. Around the world, individuals and businesses advertise everything from home accessories to fresh food on Facebook and Instagram. The recent spike in this online trading has raised a set of challenges for UAE regulators.

The crux is how to strike a balance between encouraging small businesses, the bedrock of every successful economy, and protecting consumers with regulations to ­ensure that the products they buy online are safe and delivered from reputable sources. While regulators must ­ensure they are aware of every company and individual doing business, selling goods online – whether they be ­coffee or smartphones – is an undeniably fertile area for entrepreneurs. Social media platforms have shrunk the world and made transactions across the planet as easy as one click of a mouse.

One way of solving the regulation problem is to revisit the business licensing process. Currently, licences are prohibitively priced for some individuals and small businesses. The start-up cost for a new company can outweigh any prospective revenue in the first few years of operation. The solution is to lower licensing fees for small companies that are ready to provide clear and detailed reporting on the nature of their businesses.

Not only would this ensure that entrepreneurs could test their skills with new business ideas in an environment that is regulated and secure, but it would lay the groundwork for reporting when value-added tax takes effect in 2018.

We have argued before that the growth of online shopping and cashless transactions will ease the transition to VAT reporting for businesses that have traditionally relied on cash payments. The same principle is at work with the creation of cheaper business licences for online traders.

As we embrace new models of trade, updated regulatory frameworks will have positive effects across all sectors of society.