'Leveling the Playing Field': Closing VAT loopholes could revitalise UK and US retail markets

Thought of the day

Chinese ecommerce giants Shein and Temu have for years flooded the West (see chart) with cheap low-value imports (thresholds: $800 US, £135 UK and €150 EU) that are sent direct-to-consumer and hence avoid paying VAT/sales tax.

This is perfectly legal, yet unfortunately it is killing domestic rivals who have to charge 20% VAT/sales tax on each item sold. Just look at results from Boohoo, DollarGeneral and THG as evidence.

However, what might happen if both the US and UK chose to close these perceived 'unfair' tax loopholes?

Well, the good news is that Britain and America might raise more than £2bn and $7bn respectively by equalising such tax regimes. Much better than a poke in the eye for their depleted coffers.

But that's not all.

The tax changes would also help boost the fortunes (and jobs) of domestic online and physical retailers - without materially increasing inflation, as many consumers would simply switch to buying more items locally where prices wouldn't be affected.

Meaning in the event UK chancellor Rachel Reeves did ultimately decide to 'level the playing field' and push the VAT button on low-value foreign (non EU) imports, then for investors it could materially boost the prospects of listed retailers like Next, M&S, Boohoo, Shoezone and many others.

Now that sounds like a bargain... Roll on the 30th October Budget.