A tax on online retailers could negatively impact small business and “hit at the heart of the UK’s world-leading online retail industry”, experts have warned the Government today.
In a letter to the Chief Secretary to the Treasury and pressure group the British Retail Consortium (BRC), the Co-Founders of online homewares specialist sofa.com have attacked calls for a tax on online retailers as “self-interested” and outlined how the move could affect both consumers and businesses.
In a bid to level the playing field between high street and online retailers, the BRC is considering the possibility of an online tax, as e-tailers currently pay reduced business rates compared to bricks & mortar rivals due to the size of their property portfolios.
Pat Reeves and Rohan Blacker, Co-Founders of the e-tailer, said in a letter to Danny Alexander that sofa.com, “like all profitable online retailers”, pays significant corporation tax and VAT while it also pays national insurance for employees.
The letter added: “We believe the greatest negative for the UK high street has been the growth of out of town shopping centres.
“It seems somewhat hypocritical that retailers like Sainsbury’s and B&Q - significant proponents of out of town shopping centres - are now championing themselves as ‘defenders of the high street’.
“UK food shopping shifted from local butchers and bakers to supermarkets. High streets evolve, should we deny people more housing on high streets and less traditional retail outlets if society’s needs have changed?
“It is consumers who decide which retailers are successful – this is market forces at work.
“Taxing online retailers won’t change this, but most likely lead to reduced consumer choice online.”
Reeves and Blacker also believe that cost variances are inevitable as online retailers have greater technology and delivery costs than their physical counterparts whereas traditional retailers must cope with higher rents and rates.
Last month, the BRC and Kingfisher CEO Ian Cheshire urged the Treasury to rethink its strategy in taxing e-tailers to “level the playing field”, though sofa.com hit back, claiming that established high street retailers already have a head start on newer businesses.
“Online businesses often fail; online isn’t some magical way of beating the high street, only the best businesses survive and as such, it’s absurd to imply that online retail has an “inherent advantage” over traditional shops,” the letter stated.
“The Government is calling on technology companies and entrepreneurs to help the UK economy.
“The internet enables entrepreneurs to start businesses quickly and cheaply – it’s a great place for the “little guy” with a good idea to bring a product to market.
“The vast majority of new jobs created in any year in the UK are from small firms (research from the university of Nottingham estimates that small businesses are likely to create two-thirds of all jobs).
“Therefore, an online sales tax will not be helpful.”