// Tesco has urged the government to impose a 2% online sales levy to help fund business rates
// The Big 4 leader pays about £700m annually in business rates
// Tesco said the government could raise £1.5bn through the online sales tax on physical goods
Tesco has urged the government to enforce a two per cent online sales tax to help fund the cut in business rates for shops.
The Big 4 grocery leader said the current system was unjust and damaging to the UK’s communities.
Tesco, which currently pays around £700 million a year in business rates, provided detailed proposals of shaking-up the system in a written document to the Treasury select committee investigation.
The supermarket giant said the government could raise £1.5 billion through a two per cent online sales tax on physical goods.
It also said the government could use that revenue to support a 20 per cent cut in business rates for all bricks-and-mortar retailers.
“There is overwhelming evidence that the business rates system is not equitable and is damaging investment and growth,” Tesco said.
“We believe action must be taken to avoid prolonging an anachronistic tax that has not materially changed since 1988 and is damaging communities across the UK.”
Tesco chief executive Dave Lewis was among the first major retail leaders to call on the government for an “Amazon tax” last year.
In 2015, he also warned against a “lethal cocktail” of £14 billion in extra costs over five years from an increase in business rates.
“The business rates system is increasingly outdated and in need of urgent reform,” Lewis said.
“The burden of rates has become unsustainable in a retail sector that saw 7500 net store closures last year, but still employs three million people.
“The introduction of an online sales levy would create a level playing field, incentivise investment and do so in a way which is revenue neutral for the government.”
Nevertheless, Sports Direct tycoon and House of Fraser owner Mike Ashley initially put the idea of an online sales levy forward.
Ashley called for a tax on retailers that make more over a fifth of their sales online.
Altus Group head of UK business rates Robert Hayton said: “There is now an overriding consensus of opinion that the tax playing field must be levelled, given the tax-to-turnover ratio disparity, whilst the proposal ensures additional revenue is ring-fenced for the good of the entire sector.”