Theo Paphitis urges government to close tax loophole that helps fast fashion giants

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Theo Paphitis, the retail tycoon behind brands like Ryman and Boux Avenue, has joined other British retailers in urging for a crackdown on a tax loophole exploited by Chinese retail giants such as Temu and Shein.

Paphitis highlighted that many overseas companies are avoiding customs bills in the UK by directly shipping individual orders from countries like China, thereby evading import duties. Paphitis criticized the government for failing to address these loopholes, emphasizing that British retailers are being unfairly disadvantaged.

The issue revolves around the “de minimis” rule, which exempts shipments worth less than £135 from import duties. Companies like Shein and Temu exploit this rule by shipping directly to western countries in smaller parcel sizes, bypassing the need to pay import duties. This practice has drawn concern from UK retailers, who argue that it creates an uneven playing field.

Lord Wolfson of Aspley Guise, CEO of Next, has echoed these concerns, emphasizing the need for a review of the methods used by overseas websites selling low-value products. The pressure from the UK retail industry is mounting, prompting calls for action from the government.

While companies like Temu and Shein defend their practices by citing supply chain efficiencies and operational proficiencies, Paphitis argues that the UK retail sector requires more support from the government. He particularly emphasizes the need for reforms to the business rates system, which many view as unfair and outdated.

Business rates, a tax levied on non-domestic properties, disproportionately burden physical retail stores, as they often have higher property values compared to online and out-of-town rivals. Paphitis stresses the importance of creating a fair tax system that supports the retail industry without burdening it unnecessarily.

In response, the government acknowledges the importance of the retail sector and highlights measures being taken to support businesses, including extending the reduction in business rates bills and reviewing the business rates system to make it more responsive and supportive of investment. However, Paphitis and other retailers argue that more decisive action is needed to address the challenges faced by the industry.