The CEOs of Tesco, Asda and Morrisons are among 18 retail leaders who have written to Rishi Sunak urging urgent business rates reform.
The Chancellor must use the Budget on 3 March to commit to reducing the burden on bricks & mortar shops and levelling the playing field with online retailers, according to the letter.
The letter comes as analysis suggests Amazon’s business rates bill for the 2020/21 financial year amounts to just 0.37% of its sales, compared with the 2.3% typical of physical retailers before the pandemic.
Amazon’s UK sales increased by 51% in 2020 to £19.4bn. Real estate advisor Altus Group estimates its 2020/21 business rates liabilities, including its entire UK estate of fulfilment centres, offices and Whole Foods stores, came to £71.5m.
Reports also emerged today that treasury sources have confirmed Sunak is considering an online sales tax to target companies that have done well in the pandemic and help pay back the costs of supporting businesses that haven’t. An online sales tax has been proposed previously in a consultation launched last July as part of the government’s ongoing ‘fundamental review’ of business rates.
The letter from retail leaders to Sunak, dated 5 February, said tens of thousands of retail jobs had been lost in the past 12 months with “many more to come”.
It urged Sunak to “level the playing field on tax”.
“Currently online retailers pay a lower proportion of rates per sale than bricks and mortar retailers,” it says. “We urge the government to rebalance the tax base to ensure online and bricks and mortar retailers pay a similar proportion of tax and we welcome the consideration of viable options in the government’s ‘fundamental’ review.”
The letter said the business rates burden was greatest in parts of the country which the government sought to ‘level up’ with more affluent areas. Analysis suggested 80% of constituencies with the highest rates burden were in the north and Midlands, it said, including areas where shops provided a disproportionately high number of jobs.
The letter pointed to Blackpool South, where “retail supports one in every six jobs” and Bishop Auckland, where “shops can face a rates burden eight times that of similar stores in the south east”.
It urged Sunak to reduce the burden by cutting the business rates multiplier, used to set the bill as a proportion of a shop’s rental value.
”The multiplier has risen from 35% in 1990 to over 50% today,” it said. “It should be significantly reduced, focusing on a level closer to the original rate of c. 35% of the market rent. This would make the UK more competitive and show the government is backing British shops.”
The signatories also include the bosses of Waterstones, Pets at Home, the ACS, the British Independent Retailers Association and landlord Hammerson. Between them, the 18 are said to represent over a million employees in the UK.
Shopworkers union Usdaw also backed the call today. General secretary Paddy Lillis said: “Retailers need clear and decisive action from government to make this outdated and imbalanced commercial property tax fairer. An online sales levy set at 1% would raise around £1.5bn, which could fund a cut in retail business rates of around 20%.”
However, the BRC opposed the call for an online sales tax, saying it could stifle recovery after the pandemic. BRC CEO Helen Dickinson said: “The key to reviving our high streets is fundamental reform of the business rates system and we oppose any new taxes that increase the cost burden on the industry which is already too high.
“Economic recovery after Covid will be powered by consumer demand - the Chancellor should ensure he doesn’t introduce any new taxes that stifle this.”