Online sales tax would stifle innovation, says M&S boss STEVE ROWE
Since the day I stepped foot in the store as a 15-year-old Saturday, I have been a proud shopkeeper.
I am proud to be part of an industry that provides meaningful career opportunities to more than three million people, from the colleague who runs the checkout to the colleague who runs the supply chain, anchors communities across the country and fosters the spirit entrepreneurship and innovation as we seek to meet ever-changing customer needs.
This week marked an important deadline for the future of this vibrant and vital sector, as the Government closed its consultation on a potential new Online Sales Tax (OST).
Wrong address? Steve Rowe is worried about a potential online sales tax
Given that M&S is often the standard-bearer for brick-and-mortar retail, it would be easy to assume that I would like to usher in any “solution” that claims to level the playing field for brick-and-mortar retailers, who already contribute more than 25 percent of sales tax. collected by the tax collector. despite contributing 5 percent of the total economy.
However, I fear that far from ‘rebalancing’ the cost burden of merchant fees for online gamers, their introduction would stifle the very innovation physical retail needs to compete in a digitized age.
No retailer, regardless of operating model, would argue against the need for urgent reform of an outdated and unfair retail rate model.
Nor would they argue that it is unacceptable that rates have increased 30 percent in the last decade while retail rental values have decreased by the same amount.
Landlords also have a role to play, as rents have certainly not fallen in line with that. The sad truth of these challenges is laid bare in the record vacancy rates and step drops we see in our towns and cities.
But another tax on an already overtaxed sector is not the answer.
The simple fact is that you can’t tax people to come back to stores. You need to invest and adapt.
The rapid growth of online commerce has undoubtedly profoundly impacted retail, but the entire economy is going digital.
Online ordering is just one part of how we live and shop; we click and collect products, book appointments online or order takeout directly from our mobile. When you look at these types of services, the interdependencies of modern omnichannel retailing are clear.
It is wrong to pit online and bricks and mortar against each other. Our future requires a mix of digital services with physical retail so customers can shop how and when they want.
When we do this right, stores can be a true source of competitive advantage, offering a modern, inspiring and convenient shopping experience. It’s the retailers’ job to innovate and invest to get customers back through the doors, and it’s the government’s job to ensure a level playing field and make sure the regulatory environment doesn’t make it harder.
However, the solution on the table threatens ‘traditional’ retail with a triple tax lock on its future growth. Rising business rates keep us from investing in our stores and communities. Rising national insurance and a broken apprenticeship rate model are punishing us for employing people across the country in well-paying, rewarding roles. An online sales tax would tax our future.
So with the future being as much about platforms as it is about retailers, it’s important that the UK has its share of winning platforms that can compete globally. The UK’s disadvantaged rigs will do little more than hand over the market to US and Chinese players and stunt one of the few innovative and growing segments of the UK economy.
And it will do nothing to help our stores. Introducing another tax will simply mean that retailers will cut the cloth accordingly, starting with the least profitable parts of their business. In the case of multi-channel retailers, sadly, they will more often than not be high street stores, particularly in city centers already clamoring for investment and jobs.
Now, more than ever, we cannot ignore the potential impact on hard-pressed consumers who are already swallowing a sales tax through VAT. If an online sales tax is applied in its broadest sense, hard-pressed consumers will pay an additional tax even on essential items like prescription drugs, baby items and staple foods. At any time this would be regressive, but introducing this now would be morally bankrupt.
The Government has made it clear that fundamental tariff reform is off the table, and it is easy to see why. It is a stable and visible tax collection for the treasury, which funds many vital public services.
And while retail pays more than its fair share, with many sectors contributing, particularly large employers like hospitality and hotels, the solution must be pragmatic reform to bring rates back to the reasonable levels they were in the first place.
There are three quick wins that Treasury could easily implement. Surpass the multiplier for ALL taxpayers to 35 pence below the current unsustainable level of 51 pence.
End the downward transition so that reductions in property value are reflected in rates immediately. Hold transitional relief upstream to help businesses deal with higher bills and fund centrally, easy to do when tax collection is guaranteed to be the same level each year.
These practical changes are to be funded through the OECD’s work on international corporate tax rules that will replace the UK’s Digital Services Tax next year. This will ensure that ‘free’ multinationals, many of them tech companies, pay their fair share, and merchants and innkeepers can continue to serve their communities.
The government’s job is not to stem the tide of change like King Canute; we all know that can’t work. But if it can help UK businesses, customers and communities adapt to the emerging digital economy, I see a brighter future for the retail industry and the country.
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