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The Labor leadership is resisting calls to close a tax loophole used by Shein as the party looks to encourage the controversial Chinese-founded fast fashion company to operate in London.
Tax campaigners and some retailers have urged Labour, which is likely to win Britain’s July 4 general election, to address Shein’s use of the loophole, but the party said it had no plans to do so.
The planned flotation, which could fetch a valuation of around £50 billion, is likely to be a major test for a new Labor government as the party tries to balance its centre-left ethos with its bid to boost its pro-business credentials. to polish.
Shein has also faced allegations of forced labor in its supply chain, which the company denies and says it has “a zero-tolerance policy toward forced labor.”
Labor, which is trying to demonstrate that it would be pro-investment and pro-growth in government, argues that the London Stock Exchange should welcome a Shein IPO. It claims that a UK listing would impose higher regulatory standards on the company.
But UK retailers have criticized the tax loopholes used by online retailers such as Shein and rival Temu as unfair. By shipping small packages directly to customers instead of to distribution centers, Shein does not have to pay import duties.
Rachael Henry, head of advocacy and policy at Tax Justice UK, said multinational companies often take advantage of “unfair loopholes” to the detriment of smaller rivals.
“The fact that the US and EU appear to be paying more attention to the tax arrangements of global online retailers indicates that a new government in Britain should do the same,” she said.
Retail entrepreneur Theo Paphitis said it is “incredible that the government has not addressed a gaping loophole in the tax law”, adding that this is “at the expense of British businesses paying their fair share”.
Anna Bryher of Labor Behind the Label, which campaigns for workers’ rights, said: “Many are touting Shein’s flotation as an opportunity for the UK economy. But Shein has used their business model to avoid taxes around the world.”
Retail veteran Justin King, who has campaigned for tax reform for the sector for years, said the loophole was “just the sharp end of a wider problem”.
He added: “UK based or not, online [only] retailers don’t pay taxes for the services they consume, and the retailers they compete with do, effectively subsidizing them.” The business rates paid by brick-and-mortar retailers contribute to the costs of local services such as waste collection, road maintenance or street lighting.
Lord Simon Wolfson, CEO of British retail bellwether Next, has previously called on the government to close the loophole.
Investors have also raised concerns ahead of Shein’s listing. A major asset manager said: “[Shein’s] The business model is unsustainable; one of the reasons is the tax loophole. They built an empire on this, and it could be closed down at any time.”
Some Labor figures privately believe the party must address the issue if it wins the general election. “It’s certainly something we’ll look at whether it’s listed (in Britain) or not,” said one person.
But a spokesperson for Rachel Reeves, shadow chancellor, denied that a Labor government would take action on Shein’s tax loophole.
One Labor official said the party – if it won the election – would take a tough stance on Chinese investments where international security is at stake, such as semiconductor factories or high-tech investments. But Shein didn’t fall into that category. “This is a different game,” they said.
Shein said it “fully complies with all tax policies and pays applicable taxes, including corporate income tax, VAT and employment taxes”.