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A new lobby group of UK retailers has declared itself “open to the possibility” of introducing an online sales tax to finance a big cut in business rates, highlighting deep industry divisions about how to rebalance the burden of taxation between physical and internet stores.
The Retail Jobs Alliance, which was unveiled on Tuesday and says it is a temporary one-issue group, includes supermarket groups Tesco, J Sainsbury, Coop and Wm Morrison; DIY specialist Kingfisher; bookstore Waterstones and food-to-go chain Greggs. Between them, the members employ more than 1mn people.
“We will be making the case for an overall cut in business rates for all retail premises and we are open to the possibility of funding this through the introduction of a new online sales tax,” the group said in a letter to chancellor Rishi Sunak.
The campaign is also backed by Usdaw, the shop workers’ union, and two organisations representing smaller independent retailers.
Almost all retailers that operate shops are of the view that business rates, a property tax based on annual rental costs, are too burdensome and are not adjusted often enough to reflect changes in the rental market.
But there are significant differences of opinion about whether an online sales tax is the way to finance a reduction in the business rates burden.
A group of online-only retailers set up in 2021, the UK Digital Business Association, has argued against such a levy. Its members include Ocado, electricals retailer AO, fashion groups Asos and Boohoo, and health and beauty retailer THG.
Tesco has previously suggested that a 1 per cent online sales tax could fund a 20 per cent cut in business rates for physical stores. Others, such as Currys and Frasers, have previously said that more frequent revaluations and other adjustments would better align business rates with economic reality.
The range of views has left the British Retail Consortium, which traditionally speaks for the industry on public policy issues, in a difficult position.
“The breadth of the BRC’s membership means that for perfectly good reasons it’s not able to take a position on an online sales tax,” said a spokesperson for the Retail Jobs Alliance, who added that some of those who had signed the letter were BRC members.
Andrew Goodacre, chief executive of the British Independent Retailers Association and a signatory of the letter, said online sales taxes were “a very divisive issue”.
“It’s really hard to find a position that pleases all of your membership. But according to our surveys, the majority of members are in favour of an online sales tax that taxes big companies like Amazon more than it does them”.
Some retail executives say it has become much harder for the BRC to arrive at a unified position regarding online sales taxes since Amazon, the UK’s biggest online-only retailer, became a member.
But longstanding BRC members such as Currys, John Lewis and Next are also longstanding opponents of online levies on the basis that they will simply add to the overall tax burden on retailers or be passed on to consumers. DBA members such as Asos, Boohoo and AO are also BRC members.
The BRC declined to comment but acknowledged it was working with its members to develop its response to the government consultation on online sales taxes. It has been a strident critic of the existing business rates system.
The Treasury consultation closes on May 22. An earlier report on business rates concluded that while more frequent revaluations and other adjustments could reduce the burden on retailers, it saw “little value in ripping up the system and starting afresh”.
In a normal year, the tax raises around £25bn in England, with devolved administrations in Scotland, Wales and Northern Ireland operating slightly different systems.
During the Covid-19 pandemic, retail and hospitality businesses were given substantial business rates relief and smaller retailers continue to benefit from a 50 per cent discount until April next year.
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