In a recent discussion paper, the group called for restrictions on how some online retailers avoid import duties by packaging products in smaller quantities overseas.
“This has a negative impact on the economy and the prospects of retailers who pay full taxes, including value-added tax,” the group wrote.
“Unless the playing field is leveled, there will be more business failures, fewer taxes, and more unemployment.”
The issue was raised last week at an industry event attended by at least one government minister, where retail executives publicly criticized the low levels of tax paid by companies such as Shayne.
Others privately criticized China’s fast fashion outlets, with one FTSE 100 chief executive accusing Mr Shein of “evading normal controls and tax standards”.
The latest UK figures show that in the 16 months to December 2022, profits reached £1.1bn and tax payments amounted to just £2.3m.
A Shein spokesperson said: “Shein’s success lies in its ability to produce fashionable products for its customers.
“We maintain affordability through an on-demand business model and flexible supply chain. This reduces inefficiencies, eliminates material waste, and reduces unsold inventory. We offer this benefit to our customers, which has fueled our growth.”
The Treasury Department is said to have been approached about closing the loophole ahead of the budget, but sources said there were no immediate plans to introduce any changes.
“It’s as if the government has lost sight of the purpose of the tariffs,” said Richard Allen of the Retailers Alliance Against Market Abuse.
“They’re there to protect our economy. There has to come a time when we think about our country and our economy, and all the money from those sales goes directly to China.”
By taking no action, there are growing concerns that the government is prioritizing plans to lure Mr Shein to the London Stock Exchange.
Last week it was revealed that Jeremy Hunt had met with Shane’s executive chairman Donald Tan earlier this year, during which the chancellor encouraged the company to list in the UK.