Retailers call for online tax to solve business rate inequality

London’s West End retailers are calling on the Government to introduce a business rate for online businesses to eliminate what it is calling “inequality between high street and online retailers”, which it adds will also boost the high street by cutting their business rates by 5 billion pounds a year.

The ambitious plans come from the New West End Company, which represents more than 600 retailers, hoteliers and property owners in London’s West End, and it states that the introduction of a 1 percent tax on online businesses could cut business rates by an average 17.5 percent at no cost to the Treasury.

The extra money raised would be used to reduce the rates burden for other businesses, said the New West End Company, while also solving the business rate inequality, as currently, online businesses pay just one-tenth of the business rates paid by high street businesses.

According to the British Retail Consortium, retailers account for 6 percent of GDP but pay 26 percent of business rates. In addition, New West End Company's figures show that last year’s rates revaluation saw business rates for West End stores rise by an average of 80 percent, with some shops experiencing an increase of over 130 percent.

New West End Company calling on Government to introduce a business rate for online businesses

Retailers call for online tax to solve business rate inequality

It notes that the proposed new online tax would apply only to businesses that are wholly or largely online so that high street retailers who have a strong online presence are not taxed twice, and would help high street retailers, restaurants and bars, who typically use larger store spaces in prime locations.

For instance, in 2017, Marks and Spencer paid 184 million pounds in business rates, with revenue of 9.6 billion pounds, while Amazon, with revenue of 7.3 billion pounds in the UK, paid just 14 million pounds. The New West End Company states that if Amazon had paid the same proportion of their revenue as Marks and Spencer they would have paid 140 million pounds.

Sir Peter Rogers, chairman of New West End Company said in a statement: “Business rates are currently the biggest tax that high street retailers pay, accounting for nearly half [45 percent] of retailers tax bill.

“The current structure of business rates, whereby they are linked to the value of occupied property, not economic performance, provides online retailers with an unfair advantage and a 90 percent rate discount in an already struggling bricks and mortar retail environment.”

Rogers added: “London’s West End is a major contributor to the UK economy with retailers generating over 9 billion pounds in sales a year and employing over 80,000 people, if we do not act now we damage the ability of those business to survive and continue to drive our economy.”

The proposals, which come from a report commissioned by New West End Company from Arup and local government expert Professor Tony Travers, have been submitted as written evidence to the House of Commons Housing, Communities and Local Government Select Committee high streets inquiry into “high streets and town centres 2030”.

Images: courtesy of The New West End Company