The bosses of some of Britain’s biggest retail chains, including Tesco, Morrisons, Asda and Waterstones, have joined forces to call for an overhaul of business rates to help them to compete with online giants such as Amazon.
Retailers pay £8 billion a year in business rates, more than any other sector and a quarter of the total rates bill. They argue that rates have grown disproportionately to other taxes and fail to reflect the shift to online shopping or falls in shop rent values.
The bosses of 17 retailers, including Ken Murphy of Tesco, Thierry Garnier of Kingfisher, which owns B&Q, David Potts of Morrisons, Roger Burnley of Asda, Peter Pritchard of Pets at Home and James Daunt of Waterstones, said in a letter seen by The Times: “We urge the government to rebalance the tax base to ensure online and bricks and mortar retailers pay a similar proportion of tax and we welcome the consideration of viable options in the government’s fundamental review.”
The government held a consultation on the business rates system last year but retailers are still waiting for its findings or a commitment that the Covid-19 rates relief will be extended beyond April. It is expected that some reforms will be set out in the Budget in March.
Tesco is supporting Rishi Sunak’s plans to introduce an online sales tax. Britain’s biggest retailer told The Times that it had proposed the introduction of a 1 per cent online levy for businesses with annual revenues above £1 million, which it said would support a 20 per cent reduction in business rates. Dave Lewis, Tesco’s former chief executive, had previously mooted a 2 per cent online tax but the rapid growth of online shopping during the pandemic meant that a lower levy would raise the same amount.
Analysis by WPI Strategy found that the highest rates burden was in the north and the Midlands and that shops in the northeast faced a rates bill eight times that of similar shops in the southeast. “Put simply rates are penalising shops in levelling-up constituencies,” the retail bosses said.
An online sales tax could include either a levy on all goods bought online or a tax on consumer deliveries. Some retail bosses, including Lord Wolfson of Aspley Guise, chief executive of Next, have warned that such a move would ultimately mean higher prices for consumers.
Last week it emerged that Amazon’s UK sales increased by 51 per cent to almost £20 billion last year, equivalent to £1 of every £20 spent by shoppers. It pays less in business rates on its warehouses and lockers, however, than high street chains that make a quarter of the amount of sales. Amazon’s business rates liabilities are estimated by Altus to be £71.5 million, roughly 0.37 per cent of its turnover; other retailers pay 2.3 per cent of their annual sales in rates.
A spokesman for Amazon said: “We’ve invested more than £23 billion in jobs and infrastructure in the UK since 2010. Last year we created 10,000 new jobs and last week we announced 1,000 new apprenticeships. This continued investment helped contribute to a total tax contribution of £1.1 billion during 2019: £293 million in direct taxes and £854 million in indirect taxes.”
The retail bosses also argued that the business rates multiplier, which has risen from 35 per cent of rent in 1990 to 50 per cent today, should be significantly reduced because it no longer reflected the strength of the economy or the success of businesses.
