E-Commerce Giants Face Scrutiny Over Tax Evasion and Unfair Practices

European consumers are being bombarded with as many as 50-70 daily notifications from Shein, Temu, AliExpress, and Alibaba. These hard-to-block ads originate from Swiss sites, raising concerns about privacy violations. Swiss authorities are allegedly profiting from the flow of Chinese goods managed by Swiss servers and offices, while European consumer groups raise alarms about manipulative marketing tactics.

The Dark Side of Online Shopping

The relentless marketing strategies employed by these e-commerce giants are leading to compulsive shopping habits among European consumers. According to the Bureau Européen des Unions de Consommateurs (BEUC) and the CPC Network, these companies utilize powerful algorithms and dark patterns to create consumer dependency and “confirm shaming.”

Attempts to block these notifications are often futile, as the Swiss-based companies lack accessible contact information. Moreover, a significant portion of the merchandise is of poor quality, with approximately 20% being discarded immediately upon arrival and even more within days. Reports from Bloomberg, Handelsblatt, and Les Echos indicate that these are often surplus goods rejected by Chinese consumers due to higher quality standards. This situation is causing significant damage to the European economy, as numerous business and distribution associations have pointed out.

Accusations of Tax Evasion and Market Manipulation

Cesar Araujio, CEO of the Portuguese Association of Textile Industrials, recently stated, "Shein, Temu, and Alibaba are not paying VAT, are not respecting customs duties, and are manipulating and polluting the European market; we are witnessing the largest tax evasion scheme of the 21st century in Europe."

Araujio concludes, "While European companies adhere to strict fiscal, environmental, and labor regulations, these online platforms operate outside the law, exploiting loopholes and damaging the continent's economy."

Growing Scrutiny and Declining Sales

European authorities are beginning to take action. In France, Shein faced accusations in court for selling dolls with child pornography imagery. Across Europe, legal and institutional bodies are mobilizing. Organizations such as Fashion Network and Earth have highlighted the detrimental effects of these businesses, noting that Shein's logistics operations from China produce greenhouse gas emissions equivalent to those of Lebanon.

Mounting accusations and controversies have led to a sales slump. In France, sales dropped by 38% in 48 hours and -45% in November compared to the previous month. Financial Times reported that Shein's 2024 performance fell short of expectations, with a turnover of €36.3 billion against a projected €43 billion based on Inditex-Zara, and a net profit down 40% from 2023. These companies maintain strong growth rates through costly promotions, dumping practices, and AI algorithms.

Global Concerns and Regulatory Crackdowns

The aggressive and sometimes unethical tactics employed by these Chinese giants are destabilizing trade and manufacturing sectors worldwide. Financial institutions and even Chinese authorities are expressing concerns about the negative impact on China's image. Shein has attempted to list on the stock exchanges of Singapore, New York, and London, but has been unsuccessful due to transparency concerns. The company is now considering a listing in Hong Kong.

Legal Battles and Investigations

The UK High Court has accused Shein of “manipulating customs declarations for VAT evasion,” based on reports from customs agencies. Shein has denied these allegations without providing adequate documentation. The European Commission is investigating Temu for violations of the Digital Services Act, including the sale of illegal products and a lack of transparency. They also recently raided Temu's headquarters regarding subsidies.

For at least three years, Chinese platforms have faced accusations of serious offenses from the European Commission, with little response. Noyb, a data protection NGO, has filed complaints against TikTok, AliExpress, Shein, Temu, WeChat, and Xiaomi for illegal data transfers to China. While some openly admit to sending personal data of European citizens to China, others claim to transfer data to “third countries.” Increasingly, reports indicate that many toys sold on these platforms are dangerous, toxic, and non-compliant with safety standards.

The proposed €2 tax on packages by the Italian government is insufficient given the scale of the problem and, like Trump's tariffs, will likely burden consumers. The European Commission has mandated that small imported packages, previously exempt, will be subject to a €3 tax starting in July 2026.

Impact on European Retail

In Germany, 12% of consumers have already purchased Christmas gifts from Temu, Shein, or AliExpress, and 9% plan to do so, according to Handelsblatt. The German Retail Federation (HDE) estimates that Temu and Shein will generate up to €1 billion in sales in Germany between November and December. Allianz Trade recorded 2,490 insolvencies in Germany from August 2024 to August 2025, the highest number since 2016. Promotional periods like Black Friday are not as effective as Asian online retailers offer low prices year-round, as stated by 23% of respondents.

Key Issues and Concerns

Tax Evasion

Several reports indicate that companies like Shein and Temu are potentially evading VAT and customs duties, giving them an unfair advantage over European businesses.

Data Protection

Concerns have been raised about how these platforms handle and transfer user data, particularly concerning compliance with GDPR and potential data transfers to China.

Product Safety

There are rising concerns about the safety and compliance of products sold on these platforms, particularly toys, which have been found to contain toxic materials.

Sales and Financial Impact

France Sales Decline

Shein experienced a significant drop in sales in France due to mounting accusations, with a 38% decrease in sales within 48 hours.

Germany Sales Impact

Temu and Shein are projected to generate substantial sales in Germany during the holiday season, potentially impacting local retailers.

Regulatory Actions and Investigations

European Commission's Probe into Temu

The European Commission is actively investigating Temu for potential violations of the Digital Services Act, including issues related to transparency and illegal products.

UK High Court vs. Shein

Shein faces legal action in the UK High Court over allegations of manipulating customs declarations to evade VAT.

Here is a summary table of legal and regulatory actions against Shein and Temu:

The following table outlines key financial data points related to Shein:

Below is a table outlining the concerns raised by European organizations:

The table below shows the estimated sales impact on German retailers:

Consumer Behavior

Shift to Online Shopping

More consumers are turning to online platforms like Temu and Shein for holiday shopping, which could affect traditional brick-and-mortar stores.

Price Sensitivity

Consumers are increasingly drawn to the lower prices offered by Asian online retailers, even during promotional periods like Black Friday.