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Treasury losing revenue from online sales, says Kingfisher chief
(Guardian (UK) Via Acquire Media NewsEdge) The government stands to lose out on one of its biggest sources of revenue by failing to reform the tax system to take account of online selling, the chief of one of the UK's biggest retailers has warned.
Ian Cheshire, chief executive of Kingfisher, said he would close a quarter of his company's stores were it not for long-term leases and other arrangements that would make the closures expensive. Business rates are one of the biggest charges the retailer faces, with pounds 120m going on the tax each year.
"We do pay our taxes [for the] public good," said Cheshire. "But online retailers are not facing the same tax take. For the Treasury, there is a danger that their tax base is going to disappear."
If the company was to reduce the number of its stores, the government's tax take would fall accordingly. "So 25% fewer stores would be 25% less tax," warned Cheshire, who said the company's sales and profits would be unaffected.
Online retailers take advantage of their lower costs to undercut offline competitors, who face business rates rent, higher energy and staffing costs.
"The challenge for the government is that they have to raise tax from somewhere," said Cheshire. He advises differential tax rates to stimulate business. "The tax base is based on historic models. We need a different model."
Cheshire is also chairman of the British Retail Consortium, which is campaigning for lower rates for businesses. The BRC notes that rates will increase by 2.6% in April, after a 5% rise last year. It wants a single year freeze, which it says would help halt the slide in the sector.
Retailers - with the demise of long-established names such as HMV, Jessops and Comet - have been among the worst hit businesses in the double dip recession. Cheshire met Danny Alexander, chief secretary to the Treasury, last week to press his views.
The hits to the high street come as some large online companies are under scrutiny for their tax affairs. Amazon was revealed to be using its Luxembourg subsidiary to avoid corporation tax in the UK and Google's pounds 2.5bn in UK sales resulted in a tax bill of pounds 3.4m in 2011, after it channeled profits via Ireland and Bermuda.
Kingfisher is Europe's largest home improvement retailer with more than 1,000 stores in eight countries. The company employs about 80,000 people and sales in 2011-12 reached pounds 10.8bn, of which more than half came from outside the UK, chalking up pre-tax profits of pounds 807m.
Ian Cheshire, chairman of British Retail Consortium, wants a freeze in business rates
in April instead
of a 2.6% increase
(c) 2013 Guardian Newspapers Limited.
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