Asos and Boohoo’s recent buyouts of Arcadia and Debenhams have exposed massive tax discrepancies which could wipe out the high street.
The UK government is coming under increasing pressure from both retailers and landlords to address tax issues allowing online retailers to “out-compete rivals by not paying as much tax”.
According to The Sunday Times, Asos and Boohoo paid just £48.1 million in taxes last year despite making a combined £4.5 billion in sales.
Conversely high street giants Arcadia and Debenhams, which are now set to close 562 stores across the UK, paid £160 million in business rates thanks to their expansive estates.
This morning the pair’s plunder of the high street continued as Asos agreed to buy Arcadia’s Topshop, Topman, Miss Selfridge and athleisure brand HIIT for £295 million.
It follows news that Boohoo had purchased Arcadia’s Burton, Dorothy Perkins and Wallis brands alongside Debenhams for just £55 million last week.
This is set to lead to around 25,000 job losses and cost the UK taxpayers more than £100 million.
“It’s a double crime because we are letting online businesses like Asos and Boohoo out-compete rivals by not paying as much tax — and when they kill their competitors, the creditors, which includes HM Revenue & Customs, pick up the tab for that too,” former Sainsbury’s chief executive Justin King said.
Retailers now pay a whopping quarter of the UK’s £31 billion in business rates, the highest property taxes in the OECD, despite making up around five per cent of the economy.
This has led some of retails biggest names to call on chancellor Rishi Sunak to extend the business rates moratorium for a further 12 months to avoid yet more stores collapsing during lockdown.
Theo Paphitus, Dragon’s Den star and owner of numerous high street brands, said he will be forced to close 80 Ryman stores if business rates returned in March.
Colliers International’s head of business rates John Webber has also called on the government to rethink their business rates relief on a “needs” basis.
Webber suggests that rather than offering blanket relief which has caused many supermarkets to give back relief packages voluntarily, it should be handed out depending on retailer needs after they apply for it.
“Basing the rates holiday or rates relief on a transparent “needs” basis would save the Government substantial funds compared to a blanket holiday approach and also take away the embarrassment and administrative headache that some companies faced this year who were granted the monies, but felt they should pay it back,” he said.
“We estimate a blanket six months rates holiday for retail and hospitality would cost the government around £6 billion, but an application only system with widened usage to other sectors would be no more than £4 bn or £5bn.”