Tesco, Wm Morrison and Waterstones are among companies that have urged chancellor Rishi Sunak to “level the playing field” between bricks-and-mortar stores and online retailers, as the coronavirus pandemic accelerates the already growing popularity of internet shopping.
Executives at 18 companies and organisations, including shopping centre owner Hammerson and shopworkers’ union Usdaw, on Friday wrote to Sunak requesting a new tax on online sales and a reduction in business rates.
The Treasury is already pursuing the idea of a new online sales tax, put forward in an official consultation last July. The consultation included two main options: a tax on consumer deliveries or a levy of 2 per cent on all goods bought online, raising £2bn a year.
The review also proposed more radical plans to abolish business rates and replace them with a “capital values tax” whereby the levy would be paid by the owner of the property rather than the tenant.
However Downing Street on Sunday played down the separate idea that companies that had prospered during the Covid-19 pandemic could be hit with an “excessive profits tax”, saying no such proposals were being drawn up.
The Sunday Times reported that Munira Mirza, head of policy in Number 10, has been examining the idea of a one-off levy on businesses such as big supermarket chains, delivery companies and online retailers.
Non-essential stores have been forced to shut during lockdowns and footfall has been lower than normal even in periods when restrictions were eased, meaning further opportunities for online operators to increase their market share.
In their letter to the chancellor, the signatories argued that poorer regions had been hardest hit by pandemic-related retail job losses — which last year reached more than 176,000, according to the Centre for Retail Research — citing analysis that showed roughly one in six jobs in Blackpool South, for example, was retail-related.
James Daunt, chief executive of book chain Waterstones, called business rates a “perverse tax” arguing they “result in the loss of jobs and the degradation of communities most in need of support”.
Business rates are assessed every few years and based on rent levels two years earlier, with the outcome of the next assessment scheduled for 2023. The current rate is 50 per cent of market rent, which Vivienne King, chief executive at lobby group Shopkeepers’ Campaign, said made it the largest fixed cost paid by UK retailers.
Online retailers currently pay a lower tax rate than store-based shopkeepers, something the signatories also asked Sunak to consider.
Tesco went a step further, proposing a 1 per cent online sales levy for business with annual revenues over £1m, in addition to a 20 per cent reduction in business rates. “Now is the opportunity to . . . create a system that is fair and sustainable for all,” the UK’s largest grocer said.
Amazon saw its UK sales rise 51 per cent to $26.5bn last year while its business rates liabilities were about £71.5m last April, according to real estate adviser Altus Group. That makes the ratio of its business rates to turnover just 0.36 per cent, compared to 2.3 per cent for high street retailers.
A new online sales tax would be based on turnover in the same way that business rates are paid by companies regardless of whether they are making a profit.
The government has already brought in a profits-based “digital services tax” which is a 2 per cent levy on profits paid by large companies providing social media platforms, search engines and online marketplaces — including Google and Amazon.
Sunak is not expected to update parliament on the progress of the online sales tax review in the Budget on March 3 — but could do so at the next Budget in the autumn.
However the chancellor is expected to maintain a freeze in business rate payments — which has already been in place for nearly a year — until the summer, while also maintaining some form of job support scheme.