Tesco leads call for online digital sales tax as retailers demand business rates
Tesco has called for a 1% online sales tax to be applied to digital retailers ahead of the Chancellor's spring Budget.
The call comes as leaders at UK supermarkets, high street chains and retail property owners write to the Chancellor, Rishi Sunak, demanding an overhaul of the current tax system to put them on a “level playing field” with online rivals.
Tesco chief Ken Murphy is among 18 bosses to sign a letter to Sunak calling for a permanent reduction in business rates in the 3 March Budget.
Retailers, leisure and hospitality firms have not had to pay rates for the current financial year after the Government launched a rates holiday at the onset of the pandemic.
However, the property tax is currently set to restart in April for the new financial year despite non-essential retailers remaining shut due to lockdown restrictions.
A significant number of essential retailers, including the UK’s six largest supermarket chains, handed their rates relief back to the state, in a move worth more than £2bn.
However, retailers have now said that failure to reform the rates system in the next Budget “will hamper the recovery of the retail sector post-pandemic, potentially putting thousands of jobs at risk”.
The letter, which was also signed by Asda chief Roger Burnley and Morrisons chief David Potts, warned that nearly 15,000 retail jobs have been lost already this year and “there will be many more to come”.
The coalition of retailers and landlords said reform should ensure that online retailers pay similar levels of tax to brick and mortar firms.
The letter states: “Reducing business rates for retailers and rebalancing the tax system to ensure online retailers pay a fair share of tax would be revenue-neutral, provide a vital boost to bricks and mortar retailers and support communities in need of levelling up.”
The letter falls short of specifically calling for an online sales tax, but Tesco has renewed its calls for the biggest online players to be hit with a 1% levy.
The UK’s largest private employer also called for business rates to be specifically reduced by a fifth.
A spokeswoman for Tesco said: “Our stores and our colleagues do a fantastic job serving customers and communities every day.
“We have seen over the years how the burden of business rates has increased and how this burden is felt more heavily in areas of the UK that are most in need of investment and levelling up.
“We believe strongly that there should be a level playing field for all retailers, online or physical, which is why we propose a one per cent Online Sales Levy for businesses with annual revenues over £1m, in addition to a 20% reduction in business rates.
“Now is the opportunity to reform business rates and create a system that is fair and sustainable for all.”
In 2019, Tesco’s previous chief executive Dave Lewis called for a 2% online sales levy as part of reform proposals for the property tax system.
The latest call comes days after Amazon revealed that UK sales rocketed by 51% to £19.3bn in 2020 as it benefited from lockdown shopping trends.
Waterstones managing director James Daunt, who also signed the letter, said that business rates on shops are a “perverse tax, perversely applied”.
“It is starkly evident that they result in the loss of jobs and the degradation of communities most in need of support,” he said.
“They are indefensible in their present form, with the immediate consequence of failure to reform the certain loss of tens of thousands of valuable jobs.”
The letter was signed by: Ken Murphy, CEO of Tesco; Thierry Garnier, CEO of Kingfisher; Paddy Lillis, general secretary of Usdaw; David Potts; CEO of Morrisons, Roger Burnley, CEO of Asda; James Lowman, chief executive of Association of Convenience Stores (ACS); Peter Pritchard, CEO of Pets at Home; James Daunt, managing director of Waterstones; Andrew Goodacre, CEO of British Independent Retailers Association (BIRA); Mark Bourgeois, managing director UK & Ireland at Hammerson; Jerry Schurder, head of business rates at Gerald Eve; Mark Williams, executive Director of Rivington Hark and former chair of HMG’s Retail Property Taskforce; Vivienne King, chair of The Shopkeepers’ Campaign; Philip Bier, CEO of Bier Retail; Lawrence Hutchings, chief executive of Capital and Regional; Allan Lockhart, CEO of NewRiver REIT; Scott Parsons, chief operating officer UKof Unibail-Rodamco-Westfield; and Morgan Garfield, managing director and co-founder of Ellandi.