In a letter to the Chancellor, the Retail Jobs Alliance writes that the majority of its members support an online sales tax.
The Retail Jobs Alliance is a lobbying group, that includes big companies such as Tesco, Sainsbury’s, Waterstones, Morrisons and Co-op Group. The aim of the group is the elimination of the shop tax, how the business rate on physical shops is also called, as it is one of the biggest costs for many businesses.
In their letter to Rishi Sunak, they now say that they would support the introduction of an online sales tax to reduce business rates on physical stores.
Treasury Contemplating Online Sales Tax
The letter is a response to a consultation by the Treasury, which was launched in February this year. After a business rates review reported that the so-called shop tax costs businesses £7bn, the Treasury is looking into the possibility of introducing an online sales tax.
Given the rise in online sales, a fairer tax system is needed. Because, according to figures by the Office for National Statistics (ONS), businesses with physical stores pay between 25% and 30% of the total business rates bill.
Even though, they had less than 10% gross value, compared to other industries. In order to level up, the Treasury is contemplating an online sales tax.
Whilst we’ve made no decision on whether to introduce such a tax, it’s right that, given the growing consumer trend to shop online, we work with stakeholders to assess the appropriate taxation of the retail sector.
Lucy Franzer, Financial Secretary to the Treasury
Furthermore, the British Retail Consortium (BRC) has said in their Retail, Rates And Recovery report from last September, that 83% of retailers will have to close, if business rates are not reduced.
What Do Businesses Say?
The majority of retailers and businesses with a physical store support the introduction of an online sales tax, as evidenced by the letter sent to the Chancellor by the Retail Jobs Alliance group.
Tesco has previously said that it would support a 1% tax on online sales in return for a 20% reduction in business rates.
Property specialist Colliers has conducted a survey, which shows that an online sales tax is supported by a majority of retailers and landlords, with 89% of the surveyed supporting the tax, if in turn, business rates are lowered.
It certainly seems there is overwhelming support to bring in some sort of online sales tax to try and level the playing field and take the full burden of business rates off bricks and mortar retailers.
John Webber, Head of Business Rates at Colliers
One topic is, however, dividing opinions. The question if click-and-collect sales should be included in the online sales tax, with only 54% saying they should.
However, not all businesses are in favour of such a tax. The British Retail Consortium, which is the biggest lobbyist for the sector, finds it difficult to find a common position on this topic. Because their members include Amazon, John Lewis, Currys and Next.
While Amazon is an online retailer and therefore is not in support of an online sales tax, John Lewis, Currys and Next have also been opposed to such a tax. Because these retails have both an online and store presence, they are concerned that the introduction of a tax on online sales would increase their costs considerably.
Next, Asos and the BRC have also argued that the introduction of an online sales tax will lead to price increases for customers.
However, despite some of their members not supporting this tax, the BRC has said that surveys of their members have shown that the majority of them do support a tax on online sales.
What Such A Tax Would Mean For Small Businesses?
The introduction of such a tax in combination with a reduction of business rates for physical stores would relieve some financial pressure small businesses with a physical store face.
With rising inflation and energy costs as well as supply chain issues and rising costs of some commodities, small businesses will welcome anything that will reduce their running costs.
It would also level the playing field, as big online retailers like Amazon, with out-of-town distribution centres, would have to share the business rate burden.
On the other side of the coin are small businesses who only have an online presence. The introduction of a tax on online sales would increase their costs.
Equally, those who have moved their business online during the pandemic, investing time and money to do so, will also worry about the financial implications of such a tax on their business.
With the consultation on the introduction of an online sales tax closing on 22 May, we might soon find out, if the Government will introduce such a tax. While its introduction would create winners and losers, with the majority of retailers being in favour, it might become reality.
