Shein has been accused of unfair tax practices in the UK after it emerged that the fast fashion giant generated more than £2 billion in UK sales last year, but paid just £9.6 million in corporation tax.
Campaigners have pointed out that approximately 84%, or £1.72 billion, of Shein’s sales revenue is categorised as a “purchasing” cost, significantly reducing its taxable income in the UK. This portion of its income is transferred to its parent company, Roadgete Business PTE, in Singapore.
Singapore has a much lower headline rate of corporation tax than the UK (17% as opposed to 25%). Added incentives for businesses can see tax on profits reduced to as little as 5%.
“Very little surplus left”
“Very little surplus is left in the UK to be subject to corporate income tax,” said Paul Monaghan, the chief executive of the Fair Tax Foundation, as reported in HongKong news channel Dimsum Daily. “Questions need to be asked as to how much of the economic value that Shein Distribution UK Ltd generates from its UK sales are actually being booked as profit in the UK and are subject to corporate income tax, and how much is being booked as profit in the tax haven Singapore.”
Shein has strongly rebuffed the claims about its UK tax practices. A spokesperson said, as reported in the Guardian: “As is standard in international commerce, our UK business purchases products for resale from our principal at prices consistent with prevailing market conditions and arm’s length principles, just as any independent third party would. This approach ensures that our transactions are fair, reasonable, and in line with global practices.”
Rule review
For British retailers, already struggling to compete with the ultra-low-cost business models of China-founded online retailers such as Shein, the news that Shein is using a tax break to lower its UK corporation tax adds to concerns about its use of the de minimis rule. This allows overseas sellers to send goods valued at £135 or less direct to British shoppers without paying any customs duty.
British businesses have complained of unfair competition, particularly in the wake of recent news that small parcels shipped from China to the UK that are not subject to import taxes more than doubled in value to £3 billion last year, according to reporting by the BBC.
Chancellor Rachel Reeves has confirmed that the de minimis rule is being reviewed to protect British retailers. She told the IMF and World Bank Group spring meetings in Washington: “The world has changed, and we are in a new era of global trade. The government is standing up for the British high street against the dumping of cheap imports that undercut retailers and the high street.”
The controversy surrounding Shein’s UK tax practices and use of import exemptions has intensified scrutiny of global ecommerce models that rely on low-cost, cross-border logistics. As the UK government moves to reassess the de minimis rule and address concerns over fair taxation, the outcome could reshape the competitive landscape for online retail, particularly for domestic businesses facing mounting pressure from ultra-fast fashion giants.
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