The chief executive of Next has warned an online tax is not the answer to the high street crisis, and that business rates should be slashed on shops and hiked on online retail warehouses.
Rates, the commercial equivalent of council tax, on shops should fall by 35% while the bills for online fulfilment centres should be increased by 50%, said Simon Wolfson, who runs one of the UK’s most successful retail businesses.
The challenge of operating through a pandemic meant many retailers were on the verge of administration, Wolfson said, and if those businesses were to be rescued, rates would be key to the new owner’s decision on whether to keep the shops.
The recent break up of Sir Philip Green’s fashion empire, Arcadia, saw its famous brands, including Topshop, bought by online groups who rejected its 500 stores, leading to heavy job losses.
“It would be a shame for a huge number of shops to shut unnecessarily because rates are too high,” said Wolfson in an interview with the BBC.
The businessman also came out against a mooted online sales tax because “ultimately the consumer will pay the price of that … you cannot tax people back on to the high street”.
Tesco – which is one of the biggest payers of the property-based tax – is calling for a 1% online sales tax to be imposed, alongside business rates reform.
Wolfson suggested there was a better way. There are some internet companies who “frankly don’t want to make a profit they just want to turn over as much as they can until all of their competition go out of business and then raise their margins later”, he said.
“So there is an argument for an online sales tax to stop people avoiding corporation tax. But a better way of doing that is to say if you’re an online business, pay either 2% of your turnover or 19% of your profits, whichever is the higher.
“That would forensically attack those people off-shoring profits while not damaging the nascent internet business which, frankly for us traditional retailers, is one of the few things actually keeping us afloat.”
The government launched a fundamental review of the property tax last year. A Treasury spokesman said: “We want to see thriving high streets, which is why we have spent tens of billions of pounds supporting shops throughout the pandemic and are supporting town centres through the changes online shopping brings.”
The review called for evidence on whether to “shift the balance” between online and physical shops by introducing an online sales tax, the spokesman said. “We’re considering responses now.”