Shein Accused of Tax Avoidance Amidst Record UK Sales

The digital fashion retail giant Shein is currently facing accusations from the Fair Tax Foundation of deliberately avoiding paying its fair share of UK tax. The claims suggest the Chinese-founded company, now based in Singapore, is moving a significant portion of its income to its new headquarters to reduce its British tax liabilities. Shein has vehemently denied these allegations, dismissing them as "preposterously wrong."

According to reports, Shein's UK division is accused of transferring the "vast bulk of income" to its Singaporean parent company. Despite recording over £2 billion in sales last year, Shein paid just £9.6 million in corporation tax in the UK. While this payment represents 25% of its £38.2 million pre-tax profits in the UK for 2024, aligning with the standard UK corporation tax rate, campaigners argue the overall bill is disproportionately low relative to the company’s massive sales volume.

Paul Monaghan, chief executive of the Fair Tax Foundation, explained that approximately 84% of Shein's UK sales, amounting to £1.72 billion, is transferred to its Singaporean parent group, Roadget Business Pte, as a "purchasing" cost. This leaves "very little surplus" in the UK to be subject to corporate income tax. Monaghan highlighted that Singapore offers a lower headline corporate income tax rate (17% compared to the UK's 25%) and provides special incentives that can reduce tax rates to as low as 5%, advantages which Shein's Singaporean entity is known to utilize. Indeed, financial accounts for Shein’s Singapore operation reveal an average corporation tax rate of 9.4% over the three years from 2021 to the end of 2023.

Shein has strongly refuted the claims, with a spokesperson asserting that the allegations "collapse under the most basic scrutiny." The company clarified that its UK business operates "as is standard in international commerce," purchasing products for resale from its principal at prices consistent with "prevailing market conditions and arm’s length principles." Furthermore, Shein emphasized its position in a "low-margin, high-volume industry," suggesting that the nature of its business inherently results in lower profit margins.

Recent filings for Shein Distribution UK Ltd, the retailer's UK operation, confirm robust growth. Sales in the UK increased by 32.3% to £2.05 billion in 2024. The company also reported a significant rise in pre-tax profits, reaching £38.3 million for the year, up from £24.4 million in 2023, underscoring its expanding footprint in the British market amidst the ongoing scrutiny of its tax practices.