Temu, the Chinese cross-border e-commerce juggernaut, is shaking up Europe’s retail landscape with explosive growth, but faces mounting criticism over tax practices, minimal local staffing, and product safety issues.
In a new investigation by The Guardian, Temu’s journey is detailed: the platform more than doubled its EU profits to nearly $120 million (€111 million) in 2024, with revenue reaching $1.7 billion—a staggering jump in just one year. Behind this boom, Temu’s Irish parent, Whaleco Technology, reported these profits while employing just eight staff in the EU, and paying only $18 million in corporate tax.
The Tax Loophole and EU Response
Temu’s ascent relies on what some watchdogs and competitors call tax gaming. In the words of Paul Monaghan, head of the Fair Tax Foundation, Temu’s structure leaves little or no tax benefit in Europe, calling out the company’s chain of entities in tax havens and urging regulators to protect their tax base and enforce a fairer playing field for local retailers.
Thanks to the EU’s de minimis rule, which waives customs and VAT on parcels, platforms like Temu are able to ship millions of low-value orders directly to consumers, side-stepping customs checks and significant tax payments. According to the Fair Tax Foundation, Temu’s Irish unit alone helped funnel in EU sales this year.
The European Commission plans to end the de minimis exemption in 2028, but for now, European stores pay full taxes while offshore e-commerce giants continue to undercut them.
Runaway Growth, Lean Staff, and Gaming the System
Temu’s growth is jaw-dropping: it’s gone from nearly zero to about 115 million EU customers—a quarter of the population—since entering Europe in 2023. Revenue more than doubled from $758 million (€703 million) to $1.7 billion (€1.58 billion) in 2024, further solidifying its dominance among bargain-hunting European consumers.
This multimillion-dollar empire is run in Europe by a staff of just eight employees, leveraging outsourcing and headquarters-based management to a degree rare even in high-tech sectors.
Consumer Safety and EU Regulatory Crackdown
Beyond tax, Temu faces deeper regulatory scrutiny for consumer protection. In July, the European Commission found Temu in breach of the Digital Services Act (DSA), accusing the platform of not doing enough to protect European consumers from illegal or dangerous products. A mystery shopping exercise by the Commission found that users were very likely to find non-compliant products such as baby toys and small electronics.
Temu’s spokesperson responded We categorically reject any suggestion that our structure is designed to avoid taxes. We cooperate fully and have already paid billions across European jurisdictions.
Industry and Policy Reactions
Retail and tax experts are sounding the alarm about systematic abuses of trust. As one columnist wrote: Consumers lose. Governments lose. But Shein and Temu cash in. Local retailers are left at a disadvantage; their higher operational and tax costs make it nearly impossible to compete with the flood of ultra-cheap, untaxed imports.
EU policy analysts say a fix is coming—but not before 2028, when the VAT exemption for low-value parcels is due to end. Until then, authorities will need better tools for auditing, customs control, and ensuring consumer safety across billions of cross-border microtransactions.
The Bigger Picture: Is Cheap Always Good?
Temu’s promise is clear: an endless flow of low-cost goods brought directly to the doorstep. But as scrutiny grows, the EU experience poses a bigger question—when does a cheap deal come at too high a cost? Between weakened tax bases, market distortion, and mounting product safety risks, the region is now at a crossroads: embrace change with robust rules, or watch revenue and consumer confidence erode.
Final Thoughts
Temu‘s spectacular rise in Europe spotlights both the promise and perils of frictionless global e-commerce. As profits soar and staffing and tax outlays remain shockingly low, EU governments face mounting pressure to close loopholes, enforce consumer safety, and create a fairer retail ecosystem. With investigations ongoing and regulatory reforms on the horizon, Temu is now the proving ground for the next phase of the cross-border digital economy.
