West End retailers call for online tax to address business rates inequality

business rates reform

The New West End Company has called on the government to introduce a business rates reform plan that would eliminate the inequality that exists between bricks-and-mortar and online retailers.

The organisation, which represents over 600 retailers in London’s West End district, has published a report that recommended replacing business rates with a revenue-based tax for businesses that are wholly or largely online.

It said the extra money raised through this could be used to reduce the rates burden for other businesses.

New West End Company’s figures indicate that a one per cent tax on online business revenues could raise £5 billion each year.

This could then be used to reduce business rates for bricks-and-mortar retailers by an average 17.5 per cent and at no cost to the Treasury.

New West End Company said high street retailers would benefit most from the new proposals, and that the new tax would ensure bricks-and-mortar retailers who also have a strong online presence would not be taxed twice.

The organisation is now set to ask the Chancellor to consider the proposal in his Autumn Budget later this year.

According to the British Retail Consortium (BRC), retailers account for six per cent of GDP but pay 26 per cent of business rates.

The New West End Company’s figures suggest that last year’s rates revaluation saw business rates for stores across the West End rise by an average of 80 per cent.

It added that some stores even experienced business rates increases of over 130 per cent.

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

“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 per cent rate discount in an already struggling bricks and mortar retail environment.

“London’s West End is a major contributor to the UK economy with retailers generating over £9 billion 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.”

New West End Company’s proposals were featured in a report it commissioned from Arup and local government expert Professor Tony Travers.

It comes the same week the BRC ramped up its battle against business rates by urging the government to implement a three-year freeze on increases until 2021 to allow for the “reinvention” and modernisation of retailers at a crucial time.

The business rates system has come under intense criticism since a dramatic revaluation in April last year which saw swathes of businesses bills rise dramatically.

Leaders across the retail industry and the government have vocally opposed the tax, including shadow business secretary Rebecca Long-Bailey, who accused the government of creating a “recipe for complete high street annihilation”.

Tesco chief executive Dave Lewis, Sainsbury’s chief executive Mike Coupe, Bank of England governor Mark Carney, The Entertainer chief executive Gary Grant, Argos chief executive John Rogers, retail expert and TV personality Mary Portas and numerous other high profile names have also flagged the tax for damaging the retail industry.

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