That's definitely a valid concern.

> “Twenty per cent is a large sum of money, and if your competitors are avoiding the 20% you can’t compete,”

Twenty percent is huge in retail trade. Many sellers have single-digit margins. Having a huge player engaged in such behavior on a massive scale means effectively eliminating all competition. They should compete, but on equal terms. They will probably still win, but at the same time contribute to the well-being of the society by paying taxes (just like everyone else).

Similarly, in the US, the Chinese sellers take advantage of the UPU shipping subsidies to artificially undercut sellers from other countries.

"the USPS actually charges China Post less to deliver a package from China into the U.S. than it charges a U.S. business or customer to deliver a similar size package within the 48 states"

http://www.nationalreview.com/article/439532/us-postal-servi...

Not only that but they provide better service than US shippers to China receive from China Post. (speaking as a US shipper to China)

Just to be clear, what these merchants are doing is shipping into the UK and falsified customs forms. As Borders and Customs can't inspect and assess every single package, they slip through. However, if these companies filled out the forms properly, the end consumer would be picking up that VAT.