We thought we’d heard the last of an online sales tax when the treasury ruled it out saying “we do not favour a specific tax targeted at the online business sector, although we aim to ensure that tax principles are developed which can be applied consistently across the economy”. It’s back in the papers though.
Former online Dragon, Theo Paphitis is quoted in today’s Evening Standard as saying Business Rates are “no longer fit for purpose” and should be replaced with a 2% sales tax on shopkeepers and “tax-avoiding online retailers”. He added “You wouldn’t have to bitch about Amazon any more”.
The aim according to the Evening Standard article is to balance a reduction in tax on small retailers with an increase from online distributors. Where it falls down is that once again it’s aimed at tax avoiding corporations domiciled overseas and forgets about the thousands of small online retailers who pay business rates on their warehouses, VAT, Income Tax and National Insurance and have the added expense of courier deliveries (and yes you’ve guess it, online retailers almost certainly pay VAT on their courier invoices too!).
There’s no question that Business Rates are high, too high in many cases for smaller retailers to profit on the high street. A bit like the British Retail Consortium (BRC) members who earlier this year were also claiming to love the small independent retailer and claiming an online sales tax would be good for them and that without Business Rates they’d be able to return to the high street.
It would be wrong of me to suggest that the people that would benefit most are the BRC members and people like Theo Pahpitis who owns the Ryman high street chain, the Boux Avenue high street chain and the Robert Dyas high street chain.
27 Responses
A general direct taxation across the board would not be a terrible idea. Not sure any government is going to sanction what would effectively be raising VAT even if other charges disappear.
Business rates certainly need looking at. Many councils raise business rates on existing businesses to cover the money they are missing out on on closed shops. Thus forcing more shops to close, and the decreasing circle goes on.
As an online retailer who has a B&M shop on the high street, my little idea is to reduce Business rates and pay for it by scraping the VAT threshold.
Lee
There is certainly a good justification for looking at Business Rates. Why for example does a huge Supermarket doing many millions of pounds a year in business pay less, much less, than a small shop barely paying its way pays per square foot of sales space?
The reason is actually very simple. Business rates are calculated not on the total square foot of the shop or store but on bands within the shop. The frontage and so many feet behind the shop pays the most. Then there are strips across the shop that pay progressively less business rates per square foot. So a Supermarket for much of its sales area is actually paying very little business rates per square foot. While a small shop is all in the highest rated area and so averaged out pays far more Business Rates per square foot than the Supermarket.
I would argue that Tesco, Sainsburys, Morrisons etc should be paying the very highest Business Rates per Square Foot over the whole of their selling space while the small shop should be paying a much lesser amount reflecting the fact that it does much less business per square foot.
Obviously the large companies such as Tesco who were supporters of the On Line Tax idea will not like this but so what. The onward march of the large Supermarket is behind much of the problems on the High Street at present. Certainly long before On Line Trading made its appearance the Supermarkets were causing the wholesale closure of small shops on the High Streets everywhere.
I actually like B & M shops. I like to browse around their stock. But as they have closed in large numbers over the years High Streets have changed and not for the best. Often they are a mixture of Charity Shops, Payday Lenders and Gambling Dens today. I want to see real shops once again but this is never going to happen while the rents are so high, the Business Rates are so high and the Councils keep pushing up the Car Parking fees to crazy prices. Even then it is doubtful if the High Streets will ever really recover.
I’m rather of the opinion that we have too many shops premises in this country.
Wow…..Chris T I think it’s quite clear that Cambridge_Blue was joking about the smoking comment and there was no need to go into one about your health.
Lets try and keep this forum on topic an stay away from meaningless ramblings.