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Online Sales Tax would stifle innovation, says M&S boss STEVE ROWE

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Because the day I stepped onto the shopfloor as a 15-year-old Saturday boy, I actually have been a proud shopkeeper. 

I’m proud to be a part of a sector that gives meaningful job opportunities to over three million people from the colleague manning the till to the colleague running the provision chain, anchors communities up and down the country and fosters entrepreneurship and innovation as we seek to fulfill ever evolving customer needs.

This week marked a very important deadline for the long run of this vibrant and vital sector, because the Government closed its consultation on a recent potential Online Sales Tax (OST). 

Incorrect direction? Steve Rowe has concerns over a possible Online Sales Tax

With M&S often the flagbearer for traditional retail, it might be easy to assume I’d need to usher in any ‘solution’ claiming to level the playing field for bricks & mortar retailers, who already contribute over 25 per cent of taxes collected by the taxman despite contributing 5 per cent of the entire economy. 

Nevertheless, I fear, removed from ‘rebalancing’ the price burden of business rates to the web players, its introduction would stifle the very innovation physical retail must compete in a digitalised era.

No retailer – no matter operating model – would argue against the necessity for the urgent reform of an unfair and outdated business rates model. 

Nor would they dispute that it’s unacceptable that rates have risen by 30 per cent within the last decade while retail rental values have dropped by the identical amount.

Landlords have a job to play too as rents definitely haven’t decreased in step with that. The sad truth of those challenges is laid bare within the record emptiness rates and tumbling footfall we see across our towns and cities.

But one other tax on an already overburdened sector isn’t the reply.

The easy fact is, you can’t tax people back to shops. You could invest and adapt.

No doubt, the rapid growth of online has profoundly impacted retail but the entire economy is digitising. 

Online ordering is just a part of how we live and shop; we click and collect goods, book appointments online or order a takeaway straight from our mobile. While you have a look at a lot of these services the interdependencies of recent omni-channel retailing are clear.

It’s unsuitable to pit online and bricks & mortar against one another. Our future requires a mix of digital services with physical retail so customers can shop nevertheless and every time they need. 

After we get this right, stores is usually a true source of competitive advantage – offering a contemporary, inspiring, and convenient shopping experience. It’s the job of outlets to innovate and invest to bring customers back through the doors, and it’s the job of presidency to make sure a level playing field and to ensure the regulatory environment doesn’t make that harder.

Nevertheless, the answer on the table threatens ‘traditional’ retail with a triple tax lock on its future growth. Ever-increasing business rates constrain us from investing in our shops and communities. Rising national insurance and a broken apprenticeship levy model is punishing us for employing people nationwide in rewarding, well paid roles. A web based sales tax would tax our future.

In order the long run becomes as much about platforms as retailers, it will be important the UK has its share of winning platforms that may compete globally. Disadvantaging UK based platforms will do nothing aside from hand the market to the US and Chinese players and stunt one among the few revolutionary and growing segments of the UK economy.

And it is going to do nothing to assist our shops. Introducing one more tax will simply mean retailers cut their cloth accordingly, starting with the least profitable parts of their business. Within the case of multi-channel retailers this can sadly as a rule be high street stores, particularly on the town centres already crying out for investment and jobs.

Now, greater than ever, we cannot overlook the potential impact on hard pressed consumers who already swallow a sales tax through VAT. If a web based sales tax is applied in its broadest sense, hard pressed consumers will shoulder an additional tax on even essential items comparable to prescriptions, baby items and food staples. At any time this might be regressive but introducing this in the intervening time can be morally bankrupt.

The Government has been clear that fundamental reform of rates is off the table, and it’s easy to see why. It’s a stable, visible tax take for the treasury’s coffers, which funds many vital public services. 

And while retail pays greater than its fair proportion, many sectors contribute – notably big employers like hospitality and hotels – the answer should be a realistic reform to get rates back to the sensible levels they were initially. 

There are three quick wins the Treasury could easily implement. Rebase the multiplier for ALL rate payers to 35p down from the present unsustainable level of 51p. 

End downward transition so reductions in property value are reflected in rates immediately. Keep upwards transitional relief to assist businesses take care of greater bills, and fund it centrally – easy to do when the tax take is guaranteed to be the identical level annually.

These practical changes must be funded through the OECD work on international corporate tax rules which can replace the UK’s Digital Services Tax next yr. This may ensure ‘footloose’ multinationals – lots of them tech corporations – pay their fair proportion, and shopkeepers and innkeepers can proceed to serve their communities.

The Government’s job isn’t to carry back the tide of change like King Canute – everyone knows that may’t work. But when it could possibly help UK businesses, customers and communities adapt to the emerging digital economy then I see a brighter future for the retail industry and the country.

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