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Taxes on online retailers needed in order to ‘level the playing field’ between online and high street retailers, says Parliamentary committee

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The Government needs to go further to level the playing field between online and high street retailers and should consider taxing online retailers in order to provide relief to high street traders through a business rates reduction, suggests a new Parliamentary committee report.

The High streets and town centres in 2030 report from Parliament’s Housing, Communities and Local Government Committee today suggests that the Government should “urgently” assess proposals put to its committee during six months of evidence gathering. Those proposals included an online sales tax, an increase in VAT and green taxes on deliveries and packaging. 

The report reflects a fast-changing retail environment in which shoppers now increasingly opt to buy online, resulting in store closures and empty shops on high streets that fewer people visit. It argued that while high street retailers are paying more than their fair share of tax, online retailers are not contributing enough. Amazon UK pays business rates equivalent to about 0.7% of its turnover, it said, while high street retailers pays between 1.5% and 6.5%. 

While the Government is set to introduce a Digital Services Tax from April 2020, this, says the report, “does not address the imbalance between online and high street retailers.” It adds: “The Government needs to go further and move faster to level the playing field between online and high street retailers.”

Taxes on online retailers could be used, the report suggests, to reduce business rates for high street retailers, to give retailers that invest in their properties a 12-month holiday from rates increases, or channelled via the Future High Streets Fund, currently set at £675m but needing to be increased through tax-raising on online retailers.

The report also suggests measures from changes to planning powers, and an empowered Future High Streets Task Force that would provide real support to local areas, to local action to reimagine the local high street taken through channels including the local plan. 

Retailers, meanwhile, need to find a new role that focuses on the customer experience and on convenience. They could offer personal shopping services, advice and consultations from its stores, while asking local shoppers what opening hours would better suit their needs. Finally, landlords – often “the least visible stakeholders” in high streets and town centres but “among the most important,” need to find more flexible ways to let property, while taking an active role in local partnerships. 

“Unless this urgent action is taken, we fear that future deterioration, loss of visitors and dereliction may lead to some high streets and town centres disappearing altogether,” said the report.

It went on to conclude: “We firmly believe that our high streets and town centres can have a better and more balanced future ahead of them if our recommendations are followed. This will enquire a shift from the retail-focused activities of high streets and town centres today to new uses and purposes which foster greater social interaction, community spirit and local identity and characteristics.” 

Those who gave evidence to the HCLG committee for this report included Mike Ashley of SportsDirect International, owner of House of Fraser, who said that taxing retailers on their online sales was the way to save the high street. Representatives of M&S, New Look and Lakeland Leather also gave evidence

Retail response

Today, Martin Foster, managing director of Lakeland Leather, who represented independent retailers at the inquiry, said he broadly agreed with the recommendations and conclusions of the report, but said that action need to be taken urgently. “I am pleased that the MPs listened but I am concerned over the pace at which things will move forward,” he said. We had the Mary Portas review in 2011, the Bill Grimsey review in 2013, Sir John Timpson’s review in 2018 and now the results of this latest review.

“In that time retail jobs are being lost at the rate of 70,000 a year. How many more reports does the Government need before it takes action? How many more shops need to close and how many more high streets will fade away before the issues are tackled?”
Foster said that Lakeland Leather pays property rates equivalent to 5% of its sales – seven times more than the 0.7% of sales reported for Amazon in the report.  

“It’s vital we readdress the overall tax cost not just shuffle it between retailer channels,” said Foster. “The retail sector accounts for 5% of the economy but pays 10% of business taxation and 25% of business rates. Clearly that’s wrong and needs correcting.”

As recommended in the report, Foster is focusing on improving customer experience in the 15 Lakeland Leather stores  though its Your Store: Your Community campaign that includes in-store personal shopping, in-store fashion shows and micro-influencer events. 

“Retailers are optimists and will find a way to help save our high streets but it’s not a battle we’ll win without some help from the Government, local councils and landlords,” said Foster.

However, the British Retail Consortium (BRC) said an online sales tax was not the answer to the problem.

BRC chief executive Helen Dickinson said: “While we agree that Government should examine alternatives to this broken system, we do not agree that online taxes or taxes on deliveries and packaging on those goods is the right way to go. Retailers are blurring the lines between the digital and physical experience. With eight of the top ten internet retailers also having physical shops, it is clear that an online tax would further damage the high street.

“We welcome the committee’s recommendations to mitigate the business rates burden through lower rates or investment relief. However, such relief must not result in increased costs to other retail activities. Many well known brands disappeared from our high street last year. Without a full and urgent review of business rates and business taxes,  the Government is sleepwalking into the demise of many of our local communities  up and down the country.  Failure to act by Government will have devasting consequences for local communities and consumers.”

Image: InternetRetaiing Media/Paul Skeldon

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