UK urged to address tax loophole as influx of Shein and Temu goods threatens market

Tax campaigners and retail leaders are calling on the UK government to close a significant tax loophole that could lead to a surging influx of low-cost goods from online giants like Shein and Temu. This appeal comes after the European Union announced plans to phase out its customs duty exemption for low-value parcels, aligning with the United States, which has already begun similar changes.

The changes in the US and EU are expected to curtail trade in these markets for companies like Shein, with reports already indicating that Shein’s valuation for a potential London stock market listing may drop by 20 per cent to £40 billion. Without immediate action, experts predict the UK could face an increase in imports of inexpensive goods that disrupt local retailers.

Paul Monaghan, CEO of the Fair Tax Foundation, stressed that the UK must act swiftly to protect its market from being flooded with overseas products. He noted the current tax rules favour large operators exporting inexpensive items, creating an unfair playing field for UK-based businesses. Leaders in the industry, including Andy Higginson, chair of JD Sports, echoed these concerns, underlining the moral and economic necessity of levelling the tax system.

A key criticism focuses on the UK’s £39 import VAT threshold and £135 import duty threshold, which many argue make it easy for international operators to avoid contributing to the UK economy. Andrew Goodacre, of the British Independent Retailers Association, highlighted the missed revenue opportunity in imposing duties on millions of imported products, which he claims generate little to no benefit for the local economy. He argued that these rules, originally designed for smaller operators, are now exploited by global giants operating at scale.

Retail executives like Julian Dunkerton of Superdry emphasised the need for system changes that distinguish between small-scale importers and high-volume exporters. He suggested that rules should consolidate tax obligations for entities sending thousands of parcels annually, adding that the current system weakens local retailers’ ability to compete.

Policy shifts in the US, including plans to reduce or eliminate a significant £631 customs duty exemption, further amplify the need for UK regulatory reform. Simultaneously, the EU’s decision to end its £126 import duty threshold sends a clear signal of intent. Without proactive measures, the UK risks becoming a dumping ground for goods avoided by stricter jurisdictions. Experts also warn that new reciprocal tariffs and shipping rule adjustments could complicate matters for UK retailers sourcing goods from China or other regions.

A Treasury spokesperson declined to comment on potential changes but insisted the tax regime seeks to balance reducing burdens for consumers and businesses with supporting UK enterprises. However, pressure continues to mount from across the retail industry as stakeholders demand fairness in taxation to sustain high street competitiveness.