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Tesco, Waterstones and B&Q bosses warn of high street ruin without business rates reform

·3 min read
CARDIFF, WALES - FEBRUARY 04: An empty High Street on February 4, 2021 in Cardiff, Wales. Wales went into a Level 4 lockdown from midnight on December 19. All non-essential shops have closed and people have been advised to stay home in a bid to curb infection rates. (Photo by Matthew Horwood/Getty Images)
Recent data from the Office for National Statistics (ONS) shows that full-year retail sales in physical shops for 2020 were down 10.3% from £318.5bn in 2019 to £285.8bn. Photo: Matthew Horwood/Getty Images

A host of UK retail bosses have called on the government to review the way businesses pay tax or risk high street ruin.

The CEOs of a group of 18 retailers, including Tesco (TSCO.L), Waterstones and B&Q, wrote to chancellor Rishi Sunak on Monday bolstering calls for an online sales tax on internet companies to “level the playing field.”

The retailers, which collectively represent more than a million employees, said that without reforming the commercial equivalent of council tax, high streets will face an uphill struggle to recover from the COVID-19 pandemic.

The letter was also signed by heads of Asda, Morrisons (MRW.L) and shopping centre company Hammerson (HMSO.L), who said the current system is not sustainable “in the long term and without reform.”

Tesco endorsed a 1% sales tax for online competitors such as Amazon (AMZN).

READ MORE: Online retail giants could face 'double tax' in UK on pandemic profits

Retailers have had property-based business rates discounts since the start of the pandemic, but that levy is due to restart in April.

An Amazon spokesperson said: “We’ve invested more than £23bn 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 – £293m in direct taxes and £854m in indirect taxes.”

Recent data from the Office for National Statistics (ONS) shows that full-year retail sales in physical shops for 2020 were down 10.3% from £318.5bn ($436.9bn) in 2019 to £285.8bn.

Alongside this, retail sales made online jumped over the course of the last year. According to the British Retail Consortium and KPMG, excluding food the proportion of purchases made online rose from 31% to 46%.

The calls come following reports at the weekend that a consultation is underway in the Treasury on how a digital sales tax might work.

According to emails leaked to The Sunday Times, Amazon and tech firms are among companies summoned to a meeting this month, to discuss how an online sales tax might work.

The taxes would aim to plug the black hole in the UK’s finances caused by borrowing to support jobs and the economy amid widespread lockdowns.

The Times said the Downing Street policy unit is also looking to impose an “excess profits tax” on companies that saw a surge in profit as a result of the crisis.

Companies in danger of being hit with the COVID-19 windfall tax include big supermarkets, food delivery companies Deliveroo and Just Eat (JET.L), online grocer Ocado (OCDO.L) and clothes retailer Asos (ASC.L).

A digital sales tax has been rumoured for many months but the details of it have always been hazy. In July last year, reports emerged that chancellor Rishi Sunak was allegedly mulling a similar proposal.

The proposals came to light as part of a business rates review call for evidence published by the Treasury. At the time, it said it would “consider all elements of the current system, as well as exploring the potential strengths and weaknesses of alternative property and online taxes put forward as possible replacements for rates.”

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