For example:
Original text (note that the title is centered, the first paragraph is flush left, and the next two paragraphs are indented):
Story
The man ran.
The cat ran.
The mouse ran.
Calibre's default formatting (note that it deletes my tabs and inserts spaces):
Story
The man ran.
The cat ran.
The mouse ran.
If I select "remove spaces" this is the result (note that the title is off-center and the first paragraph is incorrectly indented):
The man ran.
The cat ran.
The mouse ran.
If I select "remove spaces" and set the indent to 0 this is the result (note that none of the paragraphs are indented, which is incorrect):
Story
The man ran.
The cat ran.
The mouse ran.
As you can see, it's impossible to maintain the original formatting.