Since the day I stepped onto the shopfloor as a 15-year-old Saturday boy, I have been a proud shopkeeper.
I’m proud to be part of a sector that provides meaningful job opportunities to over three million people from the colleague manning the till to the colleague running the supply chain, anchors communities up and down the country and fosters entrepreneurship and innovation as we seek to meet ever evolving 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 new potential Online Sales Tax (OST).
Wrong direction? Steve Rowe has concerns over a potential Online Sales Tax
With M&S often the flagbearer for traditional retail, it would be easy to assume I would want to usher in any ‘solution’ claiming to level the playing field for bricks & mortar retailers, who already contribute over 25 per cent of taxes collected by the taxman despite contributing 5 per cent of the total economy.
However, I fear, far from ‘rebalancing’ the cost burden of business rates to the online players, its introduction would stifle the very innovation physical retail needs to compete in a digitalised era.
No retailer – regardless of operating model – would argue against the need for the urgent reform of an unfair and outdated business rates model.
Nor would they dispute that it’s unacceptable that rates have risen by 30 per cent in the last decade while retail rental values have dropped by the same amount.
Landlords have a role to play too as rents certainly haven’t decreased in line with that. The sad truth of these challenges is laid bare in the record vacancy rates and tumbling footfall we see across our towns and cities.
But another tax on an already overburdened sector is not the answer.
The simple fact is, you cannot tax people back to shops. You need to invest and adapt.
Without doubt, the rapid growth of online has profoundly impacted retail but the whole economy is digitising.
Online ordering is just part of how we live and shop; we click and collect goods, book appointments online or order a takeaway straight from our mobile. When you look at these types of services the interdependencies of modern omni-channel retailing are clear.
It is wrong to pit online and bricks & mortar against each other. Our future requires a blend of digital services with physical retail so customers can shop however and whenever they want.
When we get this right, stores can be a true source of competitive advantage – offering a modern, inspiring, and convenient shopping experience. It is the job of retailers to innovate and invest to bring customers back through the doors, and it is the job of government to ensure a level playing field and to make sure the regulatory environment doesn’t make that harder.
However, the solution on the table threatens ‘traditional’ retail with a triple tax lock on its future growth. Ever-increasing business rates constrain us from investing in our shops and communities. Rising national insurance and a broken apprenticeship levy model is punishing us for employing people nationwide in rewarding, well paid roles. An online sales tax would tax our future.
So as the future becomes as much about platforms as retailers, it is important the UK has its share of winning platforms that can compete globally. Disadvantaging UK based platforms will do nothing other than hand the market to the 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 shops. Introducing yet another tax will simply mean retailers cut their cloth accordingly, starting with the least profitable parts of their business. In the case of multi-channel retailers this will sadly more often than not be high street stores, particularly in town centres already crying out for investment and jobs.
Now, more than ever, we cannot overlook the potential impact on hard pressed consumers who already swallow a sales tax through VAT. If an online sales tax is applied in its broadest sense, hard pressed consumers will shoulder a further tax on even essential items such as prescriptions, baby items and food staples. At any time this would be regressive but introducing this at the moment would be morally bankrupt.
The Government has been clear that fundamental reform of rates is off the table, and it’s easy to see why. It’s a stable, visible tax take for the treasury’s coffers, which funds many vital public services.
And while retail pays more than its fair share, many sectors contribute – notably big employers like hospitality and hotels – the solution must be a pragmatic reform to get rates back to the sensible levels they were at the start.
There are three quick wins the Treasury could easily implement. Rebase the multiplier for ALL rate payers to 35p down from the current unsustainable level of 51p.
End downward transition so reductions in property value are reflected in rates immediately. Keep upwards transitional relief to help businesses deal with bigger bills, and fund it centrally – easy to do when the tax take is guaranteed to be the same level each year.
These practical changes should be funded through the OECD work on international corporate tax rules which will replace the UK’s Digital Services Tax next year. This will ensure ‘footloose’ multinationals – many of them tech companies – pay their fair share, and shopkeepers and innkeepers can continue to serve their communities.
The Government’s job is not to hold back 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 then I see a brighter future for the retail industry and the country.
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