Retailers are calling on the Chancellor to introduce a sales tax for online competitors

Supermarket retail giants have asked the Chancellor to introduce a sales tax for online competitors, to create a level playing field. They have said that the current tax system puts retailers with large estates at a disadvantage compared to online retailers.

Property based business rates have been temporarily paused since the start of the coronavirus pandemic. However, in April the tax is due to restart. To calculate business rates, the property’s rateable value is multiplied by a tax rate which is set by the government. The tax rate is reviewed and altered to take effect at the start of each financial year on 1st April. However, in the 2020 Spending Review, it was confirmed that the business rates multiplier would be frozen in 2021/22, saving businesses £575m over the next five years.

Chief executives of 18 companies have written to the Chancellor warning him that a return to the old tax system in April, will have a negative impact on the recovery of the retail sector, potentially putting thousands of jobs at risk.

A calculation by retail advisor, Altus Group, found that physical retailers would have paid £8.25bn in business rates in 2020, if they had not been given a tax holiday as a result of the pandemic. This equates to an estimated 2.9% of total retail sales.

Calls have been made to introduce a sales tax as online businesses have been found to pay less business rates than physical retailers. One online retailer’s business sales increased by 51% in 2020 whilst their business rates for 2020/21 were estimated to be 0.37% of sales, a considerable difference to business rates paid by physical retailers.

As many shops have suffered during the pandemic, a business rates reform would be in the best interest of protecting jobs and businesses. Whilst the government has acknowledged that business rates may need reviewing, they have also said that a sales tax would increase prices for consumers whilst being unrelated to businesses profit levels.