Higher UK tax for e-tailers could boost high streets says expert

By

Sandra Halliday

Published
Aug 28, 2018

There have been plenty of calls around the world for online retailers to be taxed at a higher rate than physical stores in order to level the playing field for those bricks and mortar retailers who have expensive properties and store staff to maintain.

But while as many analysts disagree about this approach as think it would be a good idea, one heavyweight voice has been added to the pro camp with one of Britain's largest property consultancies saying that raising the VAT rate for web stores could be a good idea.

Colliers International is proposing a two-tier system of retail VAT, the Times reported, and likening the idea to the way people often pay different prices for the same food and drink items depending on where they're consumed.

It's a proposal that would have a massive impact on the fashion sector as some of the most successful fashion retailers at present are operating in the pureplay online space, while many physical store retailers are seeing declining returns from their shops and are being battered by higher business property taxes.

VAT is currently 20% but Colliers has proposed a 15% tax for purchases in-store and a 22.5% rate for online transactions. With that big a differential between prices, one of the main reasons for shoppers going to online stores – the ability to find items at a cheaper price – would be eroded.

Paul Souber, head of London retail at Colliers International, said: “We're all familiar with being asked in sandwich bars if we're 'eating in or taking away'. For shopping, could we create a similarly two-tiered VAT system? This would be both an incentive for people to shop in person and also for online retailers to lease physical stores.”

Britain's Chancellor of the Exchequer, Philip Hammond, has already said that he's considering what has been dubbed an ‘Amazon tax’, although there is plenty of opposition to the concept.

Some have said that the move online is a natural evolution that shouldn't be hampered, while others have cited the fact that some who are unable to get to stores (such as the disabled or those in areas not deemed suitable for brand flagships) will be discriminated against if they have to pay higher prices online.

And there’s also the issue also of many retailers now having advanced multichannel operations and plenty of these big names could choose to subsidise their online operations in order to offer standardised prices across their different channels.

However, the influential New West End Company, which represents retailers in the important West End of London shopping district, is in favour of a higher tax on online revenues. But it doesn't think such a sharp difference as that recommended by Colliers is the way forward. Instead it's suggesting a 1% tax on the revenues of online businesses in order to raise £5 billion annually, a figure that could fund a significant reduction in business rates.