Shops pay 755% more in tax than online firms

As the war of words intensifies between major retailers over the possible introduction of a new UK online sales tax, experts say traditional retailers now pay 755%, nearly 8 times the amount more in the business rates tax, than their rival online counterparts.

A new report from real estate adviser Altus Group shows that, for every £100 earned by high street retailers, excluding non-store sales and fuel, £2.91 of that was due to local councils in business rates.

However, for large ecommerce retailers, for every £100 in sales, total business rates amounted to just 34p.

A Government consultation on rebalancing this tax to ensure physical and online stores pay a similar proportion closed this week.

Estimates suggest a revenue-based online sales tax of 1% on the online sale of goods to UK customers above an allowance of £2 million, could raise around £1 billion a year.

READ MORE: M&S boss slams ‘morally bankrupt’ online sales tax, saying ‘you cannot tax people back to shops’.

Robert Hayton, president at Altus Group, explained “ringfencing that revenue and targeting it to actually cut rates for retail, leisure and hospitality premises could lead to a reduction in rates of about 9%.”

Bosses at Sainsbury’s say that an online sales tax that funds a reduction in business rates for retailers of all sizes would level the playing field, but M&S want to see better taxing of global giants to ensure everyone pays their fair share.

Tax authorities around the world have been grappling for years to try and reach an international agreement with the likes of Amazon.

Hayton added “no solution will be easy nor perfect but, if left unchecked, could lead to the substantial extinction of the high street and the erosion of local communities” warning “unless the tax to turnover disparity is addressed, it will widen.”

Online sales rose to 27.0% in April from 25.9% in March 2022. The increase is significantly above its level of 19.9% in February 2020 before the coronavirus pandemic.

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