Ocado leads web retailers' fight-back against online tax

Online-only retailers including Ocado and Shop Direct are writing to George Osborne, blasting proposals for an online sales tax proposed by Sainsbury's, Morrisons and Topshop.

George Osborne: web retailers urge chancellor to dismiss calls for online sales tax
George Osborne: web retailers urge chancellor to dismiss calls for online sales tax

The open letter to the chancellor sympathises with bricks-and-mortar retailers wanting lower business rates on stores, but labels as "nonsense" plans to shift the burden onto online retailers via a new tax.

Justin King, chief executive of Sainsbury’s, kicked off the debate last month by accusing the Government of creating an "unlevel playing field" due to the discrepancies caused by tax paid as part of high-street retailers’ business rates, which are based on property rents.

The bosses of Ocado, Shop Direct, Appliances Online, N Brown, notonthhighstreet.com and Boden are blaming the online sales tax debate on the furore caused by Amazon’s alleged tax avoidance.

A small number of international online businesses paying a small amount of tax in the UK is a "red herring [and] an issue of domicile not online retail", according to the open letter.

The six online-only retailers are exerting pressure on Osborne by claiming an online sales tax will damage consumers, jobs and investment and set back "a rare and precious success story for the UK".

The open letter in full

Dear Sir,

Physical retailers rightly continue to call for lower business rates on their stores. But to simply shift the burden to online retailers by imposing a new tax is a nonsense that will be detrimental for consumers, jobs and investment.

Online retailers already pay tax on many fronts. Customers pay VAT while other taxes include fuel duties, employment taxes, corporation tax, as well as business rates on their warehouses and offices. Just because the online business model does not require as much property does not mean that other areas should be taxed more heavily.

An online tax would kill entrepreneurial spirit by making it harder for smaller online retailers to get started.

A popular view has been that bricks-and-mortar retailers have a high tax burden whilst a few very large international online businesses pay a small amount of tax here, therefore the tax system for all online players – big and small, UK and international – should change. But this is a red herring, an issue of domicile not online retail.

An online tax would kill entrepreneurial spirit by making it harder for smaller online retailers to get started. It would also have a detrimental effect on the supporting industries in technology, manufacturing, logistics and marketing which have been key partners in the growth of online retail. In addition many online companies are exporting to Europe and beyond, which can only be achieved successfully if there is a sound base at home. At a time when SMEs in these sectors are attempting to deliver innovation, growth and jobs they should not be choked off by the unintended consequences of an unfair tax.

It is consumers that are driving the rise in online retail, both with online-only retailers and those with bricks and mortar stores and it is consumers that will be hit the hardest, particularly the poorest. The idea is vague and ill thought-out. Does it include just those retailers which operate online-only, or those with stores too? Should online travel agents be wary? Could it also capture online financial services providers? There is no logic to penalising companies that provide consumers the convenience, efficiency and value online shopping offers.

Online is a rare and precious success story for the UK and one that we should take pride in. We support our high street counterparts in their call for lower business rates, but hitting online businesses by replacing lost revenue with this type of tax will hamper growth, slow the economy, impact jobs and reduce investment whilst not achieving a significant uplift for the Treasury.

John Roberts, CEO, Appliances Online; Julian Granville, CEO, Boden; Angela Spindler, CEO, N Brown; Holly Tucker, CEO, notonthehightreet.com; Tim Steiner, CEO, Ocado; Alex Baldock, CEO, Shop Direct

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