Marks & Spencer has hit out at Treasury plans for a new online sales tax (OST), claiming it would cause more problems than it would solve.
In February, the Chancellor launched a consultation on the introduction of the OST, the proceeds of which would theoretically allow rates to be reduced in the retail sector.
However, in a letter to Rishi Sunak, Marks & Spencer chief financial officer Eoin Tonge said: “Introducing an additional tax on retail, already overburdened, will simply mean retailers cut their cloth accordingly.
“This rationalisation will always start with the least profitable parts of a business, which, in the case of multi-channel retailers, will more often than not be high street stores.”
The letter sees M&S break ranks with other big supermarkets including Tesco, Sainsbury’s and Morrisons who are supportive of the idea, feeling that it would help to mitigate inflationary pressures and make the current system fairer.
These major supermarkets recently formed a retail coalition called Cut the Shops Tax, with the aim of lobbying government to reduce business rates.
A letter delivered earlier this month to Sunak by the coalition said: “We welcome the commitment that any OST would be used to fund reductions in business rates for retailers.
“This would help to level the playing field between online and bricks-and-mortar retailers at a time when Covid-19 has accelerated shifts in retail which were already in evidence before the pandemic.
“One recent report suggested that half of all non-food sales will be made online by 2025, and yet physical shops are taxed far more heavily than this newer and rapidly growing part of the retail sector.”
Business rates represent a significant proportion of overheads for retailers and the coalition argues that by cutting these rates, businesses will be able to invest in store development and create new jobs.
The Treasury is still undecided on whether to introduce the tax.
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