OPINION: “Online tax doesn’t lead to new demand for high street shops”
Written by Paul Clement
For many years, the place management industry has (quite rightly) obsessed about two related issues to help protect Britain’s high streets
The first is the outdated system of local business taxes. The current Business Rates system was introduced in 1990, alongside that much-loved (not!) alteration to community charges called the poll-tax. Replacing the old systems of domestic and non-domestic rates, the poll tax which lasted only until 1993 but Business Rates remain - largely unchanged apart from revaluations of the so-called ‘rateable value’ (the likely rental value, otherwise known as RV) - to this day. Like almost every Chancellor before him, Rishi Sunak promised a “fundamental review” of the Business Rates system; but a combination of the economic downturn and political imperatives of covid saw to that. Now, the current government have committed to largely maintaining the outdated system, a lost opportunity in my view
The second, connected, issue is the disparity between the costs of trading online compared to within bricks and mortar. Across the country and within all sectors, retailers (and other high street operators) have been able to control costs by either closing stores or shrinking their footprint. Both have a profound effect on the viability and vitality of our town and city centres. But, they can justify it by operating on-line, either instead of or alongside stores. Some operators have introduced click-and-collect offers, whilst others are trialling smaller formats including till-less offers. But, the direction of travel, particularly bearing in mind the high costs associated with bricks and mortar, has been clear for some time
The government have now commenced a period of consultation on the proposal of new, online taxes to help create a fairer balance between internet and on-street trading. The timing is not great and, personally, I have some reservations about the consulting on the prospect of raising taxes at a time of considerable increases in the costs of living. But, that aside, I question whether taxing online operators more will actually lead to the desired outcomes for town and city centres which must be:
A reduction in the cost of operating on the high street, compared not just to online but also to out-of-town
An encouragement to retailers to maintain bricks and mortar
Incentives for consumers to make the journey into town
The sceptic in me suggests that online retailers might just absorb the extra costs or pass them on to consumers. But, either way, that doesn’t lead to new demand for shops on our high streets
Anyway, our industry must have its say and respond. Individually, within our networks and via our industry bodies, we must consider the proposals and form a view
The report and questionnaire are available at GOV.UK: https://www.gov.uk/government/consultations/online-sales-tax-policy-consultation
The consultation closes at 10am on 22nd May 2022.
Join the conversation on LinkedIn.