Online sales tax could “kill” growth, say digital retailers

by Calum Fuller

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22 Jul 2013

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Sainsburys local store front

THE INTRODUCTION of an online sales tax or ‘marketplace fairness tax' for internet retailers would kill growth and jobs, the industry has warned.

Chief executives of online retailers - including Ocado's Tim Steiner, Shop Direct's Alex Baldock and Appliances Online's John Roberts - have signed a letter sent to the chancellor claiming the levy would destroy the UK's entrepreneurial spirit, The Times reports.

The move, designed to level the playing field between rent-paying, bricks-and-mortar shops and their online competitors, would remedy the "massive disadvantage" the high street faces, according to proponents including Sainsbury's CEO Justin King and Wm Morrison counterpart Dalton Philips.

In particular, the proposals would see the levy applied to the sale of online goods and services.

The US is already introducing the measure in the Marketplace Fairness Act 2013, with supporters arguing online businesses face no equivalent of business rates and little or no rent, both of which have risen sharply in recent years.

Business rates, for example, is calculated based on property prices and inflation, and has gone up 13% over the last three years.

But, online businesses argued that while they agree the rates and rent levels are overly punitive, spreading the burden to take in online retailers is "nonsense".

They wrote: "Physical retailers rightly continue to call for lower business rates on their stores. But to simply shift the burden to online retailers by imposing a new tax is a nonsense that will be detrimental for consumers, jobs and investment.

"A popular view has been that bricks-and-mortar retailers have a high tax burden while a few large international online businesses pay a small amount of tax here, therefore the tax system for all online players - big and small, UK and international - should change. But this is a red herring."

They went on to add the proposal is "vague and ill-thought out", pointing out it is unclear whether it would solely apply to online-only businesses or to shops with online presence.

The US Marketplace Fairness Act, which was voted for in April, will affect all companies that have transactions of more than $1m from online sales. 

 

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