Bricks and Mortar Ask for Online Tax – But What About Small Businesses?

Tesco ask for an online sales tax for the likes of Amazon, Asos, boohoo, ebay to help balance the books. How will effect small business? YBKBS Small Business Magazine
Tesco ask for an online sales tax for the likes of Amazon to help balance the books.

The ‘in person’ shopping experience and online shopping battle is beginning to heat up, putting pressure onto the Chancellor, Rishi Sunak and leaving small business owners with questions as to how this may well effect them.

Tesco has called for a 1% sales tax to be levied on online competitors, including Amazon.

In a letter to the Chancellor, Tesco boss Ken Murphy has joined with Morrisons, Asda and Waterstones to ask Rishi Sunak for a “level playing field” on tax when it comes to their online competitors, including Amazon, Asos and Boohoo.

Marc Ford

Marc Ford

Editor-in-Chief, Business Media Owner, Business Coach, Author and Keynote Speaker. Works with over 100's of small businesses every year. Trusted by BBC TV and Radio, Channel 4, Mercedes Benz, Hitachi Capital on business matters.

They say the current system puts retailers with large estates at a disadvantage to online firms. Retailers have not had to pay property-based business rates since the start of the pandemic, but this tax is due to restart in April.

Supermarkets including Tesco and Morrisons have handed back business rates relief worth £1.8bn to the government after they had been criticised for taking government support during the pandemic while announcing dividend payments to shareholders.

Other News Link: Amazon Criticised For Not Paying it’s Fair Share

The Arcadia Group collapse, including brands like Topshop, have been snapped up by online retailers leaving shops empty and thousands unemployed. YBKBS Small Business Magazine
The Arcadia Group collapse, including brands like Topshop, have been snapped up by online retailers leaving shops empty and thousands unemployed.

More Retail Moves Online

The letter arrives on the doorstep as online fashion retailer Boohoo have now bought the Dorothy Perkins, Wallis and Burton brands from failed retail group Arcadia for £25.2m. The deal includes the brands and online businesses, but not the 214 shops.

The purchase completes the sell off of Sir Philip Green’s once mighty Arcadia group, which fell into administration in November last year.

Last week, rival Asos bought Arcadia’s other leading brands, Topshop, Topman, Miss Selfridge and HIIT. The Arcadia businesses employed 13,000, a fraction of which will carry on into employment with the new owners.

Administrators Deloitte, which has been conducting the sales, said around 2,450 staff would lose their jobs as a result of the Dorothy Perkins, Wallis and Burton sale, and the stores would permanently close.

Businesses and Jobs ‘at Risk’

The chief executives of 18 companies and groups have written to the chancellor warning that a return to the old system “will hamper the recovery of the retail sector post-pandemic, potentially putting thousands of jobs at risk”.

Business rates are calculated by looking at a property’s rateable value and multiplying it by a tax rate set by the government. A new tax rate comes into effect at the start of each financial year on 1 April. According to figures from the Office for National Statistics (ONS), full-year retail sales at physical shops for the 12 months ending 31 December 2020 fell 10.3% from £318.5bn in 2019 to £285.8bn.

The group of 18 bosses stop short of asking for an online sales tax, but Tesco has called for a 1% levy.

Last week, Amazon was criticised for paying less in business rates than British bricks-and-mortar retailers. The online retail giant’s financial results revealed that UK sales for 2020 totalled $26.5bn (£19.3bn) – a 51% jump from $17.5bn in 2019.

Amazon’s overall business rates bill for 2020-21 is estimated by researchers to be £71.5m – just 0.37% of its retail sales.

This Is What They Would Have Paid

Retail adviser Altus Group says that bricks-and-mortar retailers would have paid £8.25bn in business rates in 2020, had they not been given a tax holiday due to the pandemic. It says the figure was calculated using rateable values, multiplied by the 2020 tax rate. The £8.25bn figure amounts to 2.9% of total retail sales, which is much higher than what Amazon pays.

For instance, Arcadia – which owned Topshop, Burton and Dorothy Perkins at the time – would have had to pay £91m in business rates on its 444 stores in 2020, had there not been a tax holiday, Altus Group says.

Amazon would not comment on the calculations made by Altus Group and the Centre for Retail Research (CRR) A spokesman for Amazon said: “We’ve invested more than £23bn in jobs and infrastructure in the UK since 2010. “Last year, we created 10,000 new jobs and last week we announced 1,000 new apprenticeships. This continued investment helped contribute to a total tax contribution of £1.1bn during 2019 – £293m in direct taxes and £854m in indirect taxes.”

“We want to see thriving High Streets…”

A Treasury spokesperson said: “We want to see thriving High Streets, which is why we’ve spent tens of billions of pounds supporting shops throughout the pandemic and are supporting town centres through the changes online shopping brings.

“Our business rates review call for evidence included questions on whether we should shift the balance between online and physical shops by introducing an online sales tax. We’re considering responses now and will update in due course.

“The 2020 Spending Review also confirmed that the business rates multiplier would be frozen in 2021-22, saving businesses in England £575m over the next five years.”

Variables for Small Businesses

But once again this throws up variables that small business retailers and small business retailers will struggle to deal with. Many small business owners have had to invest in websites with varying degrees of success, some sell through sites such as Amazon, eBay and Etsy, already paying fees for the privilege and should a levy be put in place, it’s unlikely that the online platforms would ‘absorb’ the costs of a new tax. The small business owners paying more percentage wise per sale than their bigger competitors. 

But for now the war of words is only going to heat up here in the UK. It’s a difficult balancing act as governments all around the world will be lining up to have some of these big businesses as allies and perhaps are clearing plots of land for a brand new multi million pound headquarters in their back-yard rather than here.

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Business Coach, Author and Consultant. Has worked with BBC TV and Radio and Channel 4 on business matters. Trusted by Mercedes Benz, Hitachi Capital. Keynote speaker.