The US has already passed its Marketplace Fairness Act (earlier this year), which allows individual states to tax online-only retailers and try to re-balance the high street vs. online. Now, Justin King thinks we should have the same thing in the UK, and he reckons that because of the public anger over corporation tax, the issue could become a key battleground for the 2015 general election.
Not long ago, King also pointed out that it’s not just corporation tax avoiding schemes by the likes of Amazon that are causing the problems. It’s also business rates paid to local councils and taxes on commercial property – online retailers have a near-negligible contribution to make to these two, adding yet more strain on the margins of the high street retailers.
Apparently business rates cost the retail industry as a whole £7bn per year, and after the amount rose by another £175m in total in April, the British Retail Consortium got round the table with some Treasury bods to try and address the issue. The dire straits were highlighted by a string of high profile administrations/collapses at the beginning of 2013, including Jessops, HMV and Blockbuster.
King says; ‘It is usually elections which galvanise parties to think about their manifestos,’ – well done, Justin, - and he ‘hopes and expects’ that a similar law to the American one will be passed soon in the UK. It’s worth noting that Sainsbury’s us actually doing OK, as yesterday it reported a like-for-like sales increase of 0.8% in the 12 weeks to 8th June. That’s the 34th quarter in a row that Sainsbury’s has managed to report sales growth. Tesco, on the other hand, reported a 1% drop in sales last week.
The supermarkets have spent recent years engaged in a price war and trying to ramp up their home delivery effort to make the most of their online audiences. Last month, Morrisons announced that it is buying a stake in delivery outfit Ocado to try and ‘bolt on’ an internet shopping facility for its customers.
There is of course the conundrum in retail more generally that whilst a new tax on online sales could help rectify any imbalance, it will ultimately result in higher prices for the consumer. That means you and I will be paying the additional tax (albeit by proxy). The idea does fly in the face of what is clearly growing consumer demand for online services rather than high street ones. A little like forcing people to buy CDs when they much prefer iTunes…
Still, we doubt anyone actually wants to see the high street die out altogether, so perhaps it is right for the government to address its decline somehow….