Superdry boss says Shein allowed to 'dodge tax'

The boss of the clothing chain Superdry says its rival Shein is being allowed to "dodge tax", and is urging the government to take action.

Julian Dunkerton told the BBC the fast fashion giant was enjoying an unfair advantage because import duties are not charged on the low-value parcels it sends direct to customers from overseas.

Shein declined to comment, but has previously said that its success was due to its "efficient supply chain", not tax exemptions.

The Treasury said tax policies had to balance the interests of consumers and retailers.

However, Mr Dunkerton said it would be in the UK's interests to get rid of this tax "loophole".

“The rules weren’t made for a company sending individual parcels [and] having a billion-pound turnover in the UK without paying any tax,” said Mr Dunkerton, founder and chief executive of Superdry.

"We’re allowing somebody to come in and be a tax avoider, essentially."

Shipments worth less than £135 that are sent directly to UK shoppers do not face import duties, but firms bringing in larger consignments do.

Before the arrival of a globalised online marketplace the exemption had limited impact, but retailers in the US and EU are now increasingly being undercut by low-cost Chinese rivals, and state treasuries are missing out on potential tax take.

Mr Dunkerton also described Shein as a "complete environmental disaster".

"Personally, I would force them into paying import duty, VAT and possibly even an environmental tax,” he told the BBC.

Shein has previously said it complies fully with all its UK tax liabilities.

Mr Dunkerton is not the only retail boss to criticise how the import duty system works.

In July, the boss of Sainsbury's, Simon Roberts, said "all retailers should be working on the same basis".

About 20% of Sainsbury's sales comes from non-food items, and Mr Roberts said: "I want to make sure that the loopholes that are currently in place are closed for some of the businesses that aren't paying tax in the right way, so it's a level playing field for everybody."

In March, the boss of Next, Lord Wolfson, also called for the government to look at the import duty system.

Shein, which was founded in China but has relocated to Singapore, has been laying the groundwork for a potential sale of shares on the stock market, prompting closer scrutiny of its practices.

The BBC understands that the firm filed initial documents for a London listing earlier this year, after a potential New York listing came under fire from both Republican and Democrat politicians.

US lawmakers were concerned over the company's "deep ties to the People’s Republic of China". It has also been accused of using forced labour in parts of its supply chains, which it denies. It told the BBC it has a "zero tolerance for forced labour".

Shein says its "test and repeat" approach, producing items in small batches and then reordering according to customer demand, means there is less waste, compared to traditional retailers.

But it has been criticised for encouraging shoppers to buy items to wear once and discard, through its low prices and "gamified" social media strategy.

The US and the EU are already looking at whether to tighten tax policies to bring Shein and other direct-to-consumer businesses, like Chinese retailer Temu, into the net.

Shein has previously argued its success was not down to tax exemptions but was due to providing customers with affordable fashion.

An HM Treasury spokesperson said: “Our customs and tax regime balances reducing burdens for businesses and consumers buying lower-value goods from overseas with the interests of UK businesses."

VAT - value added tax - was charged at the same rate on all goods irrespective of their origin or value, they added.

Mr Dunkerton founded Superdry more than 20 years ago.

Its distinctive Japanese-style T-shirts were once worn by Hollywood actors and sports stars and, at its peak in 2018, the company was valued at £1.8bn.

But the firm’s popularity has declined, and in July it de-listed from the London Stock Exchange after nearly 15 years.

Its shares now trade on an alternative exchange and the company is valued at less than £10m. Mr Dunkerton says he is still working to turn the firm's fortunes around, and he confirmed he would try again to take the company private.

You can hear the full interview with Superdry boss Julian Dunkerton on Wake Up To Money on BBC Sounds.