Treasury rejects calls for online sales tax
(Guardian (UK) Via Acquire Media NewsEdge) Online grocer Ocado has welcomed the Treasury's move to dismiss demands by its bricks and mortar rivals for a new sales tax on web-based retailers.
News that the government is against an online sales tax comes as a blow to high street retailers, including Sainsbury's, whose chief executive, Justin King, among others, has argued that they face an "unlevel playing field" because of business rates levied on properties.
The Treasury has responded to the row, saying it does "not favour a specific tax targeted at the online sector, although we aim to ensure that tax principles are developed which can be applied consistently across the economy", according to a letter seen by the Sunday Telegraph.
Ocado, whose boss, Tim Steiner, put himself on a collision course with its new business partner Morrisons over the issue, said yesterday: "We are delighted that the Treasury is against placing an extra burden on innovative industry operators in the most dynamic part of the economy.
Steiner had been among a group of chief executives - including those of Shop Direct, Boden and N Brown - who laid out their opposition in a letter to the chancellor this year, arguing that businesses trying to deliver "innovation, growth and jobs" should not be "choked off by unintended consequences of an unfair tax".
The Ocado boss fanned the row in July when he said: "Bricks and mortar retailers need to shut more shops and stop moaning about it."
For their part, longer-established retailers argued the business rate system was overdue for a shakeup. King recently pointed to a US online tax system as a possible alternative, while Dalton Philips, chief executive at Morrisons, said new trends required new taxes. "As more and more sales migrate online, it seems to me intuitive that you would tax the online channels as well," he said.
The British Retail Consortium had urged companies to end the infighting and focus on reforming business rates.
Reacting to the Treasury's reported opposition to an online sales tax, the BRC director general, Helen Dickinson, said: "The whole question of an online tax has had a lot of coverage but it's not the place to start. It's important that common principles should apply to all businesses - but the principles that apply at the moment are from a bygone age. Business rates in particular have long since ceased to be fit-for-purpose."
A recent report by PricewaterhouseCoopers found that business rates were higher than corporation tax. For every pounds 1 of corporation tax, the top 100 retailers paid pounds 1.44 in business rates. Online retailers still have to pay rates on the warehouses they use. Nonetheless, because the rates are calculated on rent, they are far lower than on a busy high street.
Ocado, making a delivery above, welcomed the Treasury's opposition to a new sales tax Photograph: Bloomberg/Getty Images
(c) 2013 Guardian Newspapers Limited.
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