Retail trade union Usdaw has today responded to a Government consultation on the introduction of an online sales tax as a means to rebalance the taxation of the retail sector between online and in-store retail.

Looking at the current burden of taxation, retail represents only 5% of the UK economy, yet  pays 25% of business rates, approximately £8bn. Research from the British Retail Consortium found that 85% of retailers say that business rates is an ‘extremely’ or ‘very important’ issue when opening or closing stores. Also business rates had a material impact in the decision-making process for two-thirds of store closures in the past two years.

Paddy Lillis – Usdaw General Secretary says: “The current business rates system is not fit for purpose, as it places bricks and mortar retailers at a significant disadvantage to online retail. In effect this amounts to nothing more than an unfair ‘Shops Tax’ and action has to be taken to level the playing field.

“Cutting the ‘Shops Tax’ will help protect shops from closure, encourage growth in high street retail, reinvigorate our struggling town and city centres, allow retailers to innovate and importantly protect and create jobs. That is the best way to tackle the problem of empty shop units.

“It is crucial that any online sales tax is used to fund a reduction in business rates and we have joined with major employers in the newly formed Retail Jobs Alliance to support this approach. The burden of business rates on bricks and mortar retailers is unfair and a serious threat to jobs.

“The case for introducing an online tax has grown as more UK retail sales have shifted online. The Coronavirus pandemic accelerated this shift as lockdowns forced closures of non-essential retailers, and record numbers of people began shopping online. Usdaw supported these lockdowns as a public health necessity, but they had the effect of further inflating the artificial competitive advantage held by online retail.

“We recognise the development of a new online sales tax will require careful economic and legal consideration. However, given the strength of the economic case for reform of business rates, the introduction of an online sales tax would be a fair and balanced approach to achieving a more level playing field between online and bricks and mortar retail.  A reduction in business rates would support retailers to invest in our high streets and in the workforce, having a positive impact on communities and the wider economy.”

Usdaw recognises concerns about the potential impact of an online sales tax on businesses and the economy and we believe they can be addressed by:

  1. Collecting it annually, rather than at the point of purchase, to minimise the risk of costs being passed on to consumers.
  2. Setting it at a level that minimises impact on growth and investment within retail. A 1% or 2% online sales tax could create a significant and meaningful long term income stream.
  3. Excluding ‘click and collect’ and orders made in store but delivered at home. This would mitigate the impact on multi-channel retailing that drives footfall on our high streets.
  4. Closing any online market place loopholes to ensure the levy is not simply passed on to smaller retailers, as part of the wider problem of tackling corporate tax avoidance.
  5. Considering exemptions for small businesses to mitigate any negative impact.
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