Demand for level playing field
Tesco chief Lewis calls for 2% online tax and rates cut
Bricks and mortar stores need help, says Tesco chief executive (pic: Terry Murden)
Tesco chief executive Dave Lewis has renewed his call for a 2% online sales tax to help compensate for a 20% cut in business rates on all shops and stores across the country.
Britain’s largest retailer, which pays about £700m a year in business rates, is calling for a rebalancing in the revenue which is raised from the sector.
In written evidence to a Treasury select committee investigation, the company says the government could raise £1.25 billion a year from an online sales levy of 2%. This could help pay for a significant cut in business rates for bricks-and-mortar retailers.
“There is overwhelming evidence that the business rates system is not equitable and is damaging investment and growth,” Tesco said in its submission.
“We believe action must be taken to avoid prolonging an anachronistic tax that has not materially changed since 1988 and is damaging communities across the UK.”
Mr Lewis last year joined calls for a so-called Amazon Tax last which supporters, including Mike Ashley of Sports Direct, have demanded in order to create a level playing field for retailers.
In a letter to The Grocer in October on his views on business rates, Mr Lewis said: “The business rates system has been in place for 30 years and simply hasn’t kept pace with changes to the way we shop. Since March this year  several major retailers have gone to the wall, taking 82,000 jobs out of the market and leaving premises lying empty.
“Shops can fail for a number of reasons, and the burden of business rates is one we shouldn’t dismiss. If someone is looking to open a shop today, they face an effective rate of tax on investment over nearly 50% before they sell anything. Rates are a barrier to businesses, large or small.”
“As the government faces the difficult task of balancing the books, it’s important that workable solutions are offered rather than just calling for a freeze or reform of business rates. One such, revenue neutral, proposal is a simple 2% levy on goods sold online. This would raise £1.25bn for the Exchequer – enough to pay for a 20% cut to business rates for retailers all over the country.
“As the UK’s largest online grocer, we will be one of the biggest contributors to the levy. However, I truly believe we have to move towards levelling the playing field – to ensure we give shoppers the choice to buy on-line, or to visit a store, and to protect the contribution to the local economies and communities.
“This levy would support innovation and investment essential to the future of retail. And crucially, our proposed approach would exclude small businesses, ensuring the entrepreneurialism that drives new ideas, continues to thrive.”
Regarding its latest submission, Mr Lewis said: “The business rates system is increasingly outdated and in need of urgent reform. The burden of rates has become unsustainable in a retail sector that saw 7,500 net store closures last year, but still employs three million people.
“The introduction of an online sales levy would create a level playing field, incentivise investment and do so in a way which is revenue neutral for the government,” said Mr Lewis. The Guardian reports that an online tax would be compatible with EU state aid rules.
The Treasury select committee is looking at the impact of changes to business rates policy since 2017 and possible alternatives to the property-based tax.
Robert Hayton, the head of UK business rates at property adviser Altus Group, said: “There is now an overriding consensus of opinion that the tax playing field must be levelled, given the tax-to-turnover ratio disparity, whilst the proposal ensures additional revenue is ring-fenced for the good of the entire sector.”
Scottish rates at 20-year high
New figures have revealed that the business rate poundage in Scotland is at its highest in 20 years.
Scottish ministers have confirmed that both the headline poundage/tax rate and the large business rates supplement have reached their highest levels since 1999/2000.
Since the turn of this decade the headline business rate has leapt from 40.7% to 49%. For the 22,011 medium-sized and larger commercial premises (5,065 are retailers) liable for the large business rates supplement, the figures over the same period are 41.4% and 51.6% respectively.
Retail accounts for a fifth of business rates. April’s increase in the business rate added a further £13.2 million to retailers’ rates bills in Scotland.
David Lonsdale, pictured, director of the Scottish Retail Consortium, said: “Headway is being made on rates reform. However, progress is uneven and the overall burden of business rates is onerous. This is at a time when firms are already grappling with other government-imposed cost rises and with one in every eight shops in our town centres lying vacant.
“The cumulative burden of tax and regulatory costs has mushroomed over recent years and is accelerating the pace of change within the retail industry, as firms seek to reinvent themselves in the face of profound changes in shopping habits.
“We want to see a medium term plan for lowering the rates burden, coupled with restoration of the level playing field with England on the large firms’ supplement. This would increase retailers’ confidence about investing in new and refurbished shop premises.”