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Published
Feb 19, 2021
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Next chief calls for urgent action on business rates

Published
Feb 19, 2021

Despite growing calls for urgent action on high street business rates, the UK government is expected to delay any decision until the autumn, according to reports.


Photo: Sandra Halliday


Leading the chorus for change is Lord Simon Wolfson, boss of UK fashion retailer Next. On Tuesday, he called for retail business rates to be slashed by 35% while the tax on warehouses used by online businesses could be increase by 50%. However, he rejected calls for introducing an outright tax on online sales.

Lord Wolfson told the BBC that unless the government sets rates at a level that is fair, a huge number of stores will have to close unnecessarily. He said the current system was "unfair" to bricks and mortar retailers, many of whom are struggling in the pandemic.

But Chancellor Rishi Sunak is set to delay the Treasury’s report on the “fundamental review of business rates” until the autumn.

It's reported that the chancellor sees postponing the report to the autumn as a way to allow him to make decisions when the economic uncertainty caused by the pandemic has reduced.

However, the business rates holiday in England, due to end on 31 March, is expected to be extended into the summer, along with the furlough scheme. Sunak is expected to confirm these moves in his budget on 3 March.

UNFAIR TAX

Earlier, Lord Wolfson told the BBC the value of high street retail properties had fallen dramatically in the crisis "but the business rates bill hasn't reflected that”.

Using his own experience at Next as an example, he said: "In-store sales at Next have gone down 25% since 2015 but our rates on those properties have gone up 9%. They have become unfair because they no longer reflect the value property against which they're charged”.

Some of the cost to the government of a retail business rates cut could be offset by raising rates on warehouses and online fulfilment centres, he argued. Their value has risen significantly as more retail has moved from the high street to online, he noted.

"Rents on shops have been coming down, rents on warehouses have been going up and the rates don't fairly reflect the value of warehouse property either. So I think the government can fund some of this by increasing rates on warehousing by around 50%”.

Although there’s also widespread support for an online sales tax to level the playing field between physical and online retailers, Lord Wolfson thinks that would be a mistake.

He told the BBC: “I'm against an online sales tax because ultimately the consumer will pay the price of that and actually I don't think anyone is going to go back to the high street because there's a 2% online tax or whatever number they come up with. You cannot tax people back on to the high street.

"An online tax isn't going to get people back... it is going to put a hole in consumers' pockets”, he stressed.

He added: "There are some internet companies who frankly don't want to make a profit, they just want to turn over as much as they can until all of their competition go out of business and then raise their margins later. So there is an argument for an online sales tax to stop people avoiding corporation tax. But a better way of doing that is to say if you're an online business, pay either 2% of your turnover or 19% of your profits, whichever is the higher.

"That would forensically attack those people off-shoring profits while not damaging the nascent internet business which, frankly for us traditional retailers, is one of the few things actually keeping us afloat”.

He suggested this could level the playing field between online giants such as Amazon and traditional chains with expensive city centre stores.

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