German Finance Minister Christian Lindner faces criticism for allegedly not doing enough to combat widespread tax and customs fraud by Chinese online retailers like Temu and Shein. Opposition voices are increasing pressure on the government to address the issue more effectively.
Allegations of billions in lost revenue due to tax loopholes
Accusations are mounting against Christian Lindner (FDP), with claims that the German Federal Ministry of Finance is not taking adequate steps to tackle the massive customs and tax evasion associated with shipments from China. This is according to documents addressed to former State Secretary of Finance, Michael Meister (CDU), obtained by WirtschaftsWoche.
Meister highlighted that in 2023, over 2.3 billion items imported from China fell below the customs exemption threshold of €150. This figure is expected to rise this year. If up to 65 percent of these imports were undervalued, the damage in unpaid duties and import taxes could reach “double-digit billions,” Meister told WirtschaftsWoche.
Typically, goods valued over €150 are subject to customs duties based on the value of the goods and shipping costs. While packages valued below €150 are exempt from customs duties, they are still subject to import VAT. Meister, a CDU member of the Bundestag, is calling for urgent action, urging the government to “quickly and decisively combat the suspected tax tricks of Chinese online retailers.”
Chinese e-commerce platforms exploit customs loopholes
Investigations by SWR earlier this year revealed that Chinese online platforms are using tax loopholes to send a large portion of their goods to Europe duty-free. One common tactic involves splitting orders into two packages. “If you add up the value of the shipments, you exceed the €150 threshold,” customs officer Murielle Mathieu told SWR. “This was done deliberately to avoid customs duties. It’s fraud.”
Chinese platforms are also reportedly exploiting the “Import-One-Stop-Shop” (IOSS) procedure, a special rule in the area of VAT. For instance, Temu, whose parent company PDD Holdings is now based in Ireland, is registered there. Temu is required to report and pay VAT to the Irish tax authorities, who then distribute the tax to EU countries, including Germany, when German customers purchase from Shein or Temu.
However, there appears to be a lack of transparency in this process. “It invites fraud,” Florian Köbler of the German Tax Union told SWR, suggesting that Germany could be losing hundreds of millions of euros due to insufficient EU-wide coordination.
EU customs reform delayed as Chinese platforms gain market share
At the Liège airport customs office, nearly 200 customs officers are tasked with inspecting the flood of packages from the Far East. “We are being inundated with goods,” team leader Thomas José told SWR. “We know that senders are underreporting the value of goods, but we can’t check everything.” In light of the overwhelming volume of goods flowing through platforms like Temu and Shein, the EU is considering a reform of its customs regulations. However, the EU Commission’s plan to overhaul customs laws isn’t slated for implementation until 2028, with some aspects potentially delayed until 2036.
Finance State Secretary Katja Hessel (FDP) cautioned that the customs reform is a comprehensive and complex regulatory package. Due to the burdens it would impose on businesses and administration, the “currently planned transition periods are already quite tight and may not be sufficient,” Hessel wrote to Meister.
The rise of Temu and Shein is putting increasing pressure on German companies. According to an IFH survey, 91 percent of consumers are now familiar with Asian goods marketplaces like Temu, Shein, and Wish, with 43 percent using them. These figures are more than ten percentage points higher than a year ago. Temu, in particular, has seen significant growth, with its parent company PDD Holdings now based in Ireland. In February, temu.com recorded around 29 million visits in Germany, ranking third behind Otto.
