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retail environment

Retail community remains divided over online tax

Plans to introduce a tax upon online retail businesses as part of a levelling up between clicks and mortar and bricks and mortar continues to divide the retail community.

A survey from property specialist Colliers found that almost 90 per cent of retailers back an online sales tax providing it eases the business rates burden while leading high street brands take a more ambivalent approach.

Outgoing M&S chief executive Mark Rowe has criticised the government’s planned Online Sales Tax, suggesting it would “stifle” innovation in the physical retail space. 

In an article published by The Mail on Sunday, he said that even though the retailer is “often the flagbearer for traditional retail”, he is not in support of the tax.

“If an online sales tax is applied in its broadest sense, hard pressed consumers will shoulder a further tax on even essential items such as prescriptions, baby items and food staples. 

“At any time this would be regressive but introducing this at the moment would be morally bankrupt.”

A consultation exploring the introduction of an e-commerce tax was concluded earlier this month.

The government says that the proposed tax could help rebalance the taxation of the retail sector between online and in-store retail.

“However, I fear, far from 'rebalancing' the cost burden of business rates to the online players, its introduction would stifle the very innovation physical retail needs to compete in a digitalised era,” said Mark Rowe.  

He said that another tax on an “overburdened sector” was “not the answer”, suggesting that this would not attract people back to shops. 

Instead, he claims it is the role of retailers to innovate and invest and the job of the government to “ensure a level playing field and to make sure the regulatory environment doesn't make that harder”.

His view is shared by the John Lewis & Partners, a spokesman for which told the Retail gazette: ”While we support reform of business rates, we don’t think the solution should be an online sales tax, which is likely to raise the overall level of taxation on an already heavily taxed retail industry.”

Meanwhile, retail giants including retail giants Tesco, Sainsbury’s, the Co-op, Morrisons and Kingfisher have formed the Retail Jobs Alliance, a coalition to petition the government for a permanent business rates cut funded by the introduction of a new online tax.

The Alliance insists that a cut in business rates would help retailers to invest in shops and jobs, and to keep prices down for customers as the cost-of-living soars, and an online sales tax would be acceptable as part of this rates reform.

It says: “A meaningful cut in the shops tax would make a big difference to retailers’ ability to invest more in the shops and stores that we know customers value, as well as to create jobs.

“This would make it easier for everyone in the retail sector to mitigate inflationary pressures, keep existing shops open and open new ones.”

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