UK Retailers Urge Government to Close Tax Loophole

Retailers and tax campaigners are calling on the UK government to close a loophole that allows companies like Shein and Temu to flood the market with cheap imports, avoiding taxes and undercutting local businesses.

EU and US Crack Down on Tax Exemptions

The pressure on the UK follows moves by the EU and US to phase out customs duty exemptions for low-value parcels, a rule that Chinese e-commerce giants have used to ship goods tax-free.

The policy shift is expected to impact Shein’s operations significantly, with reports indicating that the retailer may need to cut its London IPO valuation to $50 billion, about 20% lower than previous expectations.

Retail Leaders Demand Fair Tax Rules

UK business leaders argue that the loophole gives overseas sellers an unfair edge over British retailers:

• Paul Monaghan, CEO of the Fair Tax Foundation: “The government needs to tighten the gaping UK VAT and import tax loopholes as soon as possible to protect consumers and keep the high street alive.”
• Andy Higginson, chair of JD Sports: “We don’t want anyone to have an unfair advantage.” He also pointed out the moral case for businesses profiting from UK consumers to contribute to the economy.
• Andrew Goodacre, British Independent Retailers Association: “For a government ‘pleading poverty,’ it seems crazy to miss out on a huge income opportunity.”
• Julian Dunkerton, CEO of Superdry: “The rules were meant for small importers, not massive corporations.”

Calls for Policy Reform

Retail leaders suggest a reform where companies exceeding a certain volume of imports would be subject to stricter tax rules, rather than taxing every small parcel individually.

“This is not about every small parcel being challenged,” Dunkerton explained, “but about consolidating those exceeding a certain threshold.”

Trump’s Trade Policy Increases Pressure

In the US, Donald Trump has pledged to eliminate the current $800 de minimis limit, which allows duty-free imports from China, and possibly extend the policy to Canada and Mexico.

With the US and EU tightening their tax rules, UK retailers warn that failing to act will lead to a massive surge in untaxed imports, further harming local businesses.

Conclusion

The UK government faces growing pressure to follow the US and EU in closing tax loopholes benefiting overseas retailers. Without action, Shein and Temu could flood the UK market even further, making it harder for local businesses to compete.