West End body calls for UK e-tail sales tax to create level playing field

By

Sandra Halliday

Published
Jul 6, 2018

The UK’s chancellor Philip Hammond has admitted that business rates are hurting retailers and that he’s looking for “a better way of taxing the digital economy” in order to create a level playing field between e-tailers and physical store chains. But it looks like any solution would be through corporation tax rather than the business rates reform that retailers want.

Meanwhile the New West End Company (NWEC) issued a call on Friday for Hammond to take bold steps with the body that represents retailers in Oxford, Regent and Bond Streets saying that a 1% sales tax on online businesses could raise over £5 billion to ease the business rates burden faced by high street retailers.

NWEC called for the introduction of a revenue-based tax for online businesses instead of business rates. The extra money raised would be used to reduce the rates burden for other businesses as e-tailers currently pay just one tenth of the amount paid by high street peers.

The body said that such a tax could allow the government to cut business rates by an average 17.5%, at no cost to the Treasury, and high street businesses “would benefit from an even greater reduction in their rate bills since they pay a disproportionate amount of this tax.”  

According to the British Retail Consortium, retailers account for 6% of GDP but pay 26% of business rates.

The proposals come from a report commissioned by NWEC from Arup and local government expert Professor Tony Travers and recommend replacing business rates with the revenue-based tax for businesses that are “wholly or largely” online.

Sir Peter Rogers, Chairman of New West End Company said: “Business rates are currently the biggest tax that high street retailers pay, accounting for 45% of [the] tax bill. The current structure, whereby they are linked to the value of occupied property, not economic performance, provides online retailers with an unfair advantage and a 90% rate discount in an already struggling bricks and mortar retail environment.

“London’s West End is a major contributor to the UK economy with retailers generating over £9 billion in sales a year and employing over 80,000 people, if we do not act now we damage the ability of those businesses to survive and continue to drive our economy.”  

NWEC also said that in 2017, M&S paid £184 million in business rates, with revenue of £9.6 billion. Amazon, with revenue of £7.3 billion in the UK, paid just £14 million. If Amazon had paid the same proportion of its revenue as M&S it would have paid £140 million.