Blog: Etailers should not be penalised for having cost-effective business models

Sofa.com’s letter to the Treasury earlier this week warned an online retail tax would “hit at the heart of the UK’s world-leading online retail industry”.

It’s hard to argue with. The booming online retail industry is a UK success story to be proud of amid a transformed consumer environment where companies have had to change the way they do business.

With sales of £50bn last year, the UK’s online retailers are leading the way, developing etail entrepreneurs and championing online consumer engagement.

This contrasts starkly with the countless stories I have written on the pains of physical retailers that have been suffering under onerous business rates bills, which have surged over the past three years due to the outdated property tax system.

So the suggestion that online retailers should be taxed in order to put them on a level footing with bricks and mortar retailers, who are themselves fighting against the old fashioned rates system, sounds like a regressive and misplaced notion.

Today former Focus boss Bill Grimsey laid out his plans to produce an alternative review of the high street to the Portas Review, which was designed to revive struggling town centres.

“We need to accept that retail has a lesser and lesser role to play on the high street,” he said.

If this is true, do we really want to make it harder for them to trade online too?

Sainsbury’s boss Justin King suggested we follow the US’s Marketplace Fairness Tax, which will allow US states to collect taxes on the sale of online products or services.

But taxes on the sector will hinder a vibrant industry, which includes the likes of Asos, The Hut and Wiggle, that we should hold in esteem rather than punish. Particularly in these challenging economic conditions, when eccommerce is one of the few growing sectors helping shore up the UK economy.

The British Retail Consortium is examining the idea of a tax, and so far does not seem to be in favour of it. Its corporate affairs director Amanda Callaghan today said: “We need to make it clear within the Treasury that there is no point in penalizing a strong part of the economy.”

Leveling the playing field should not involve more taxes on the retail sector which already pays its fair share. Instead, The Treasury should overhaul the whole tax system and drag themselves into the digital age with a tax regime encompassing both online and stores. If it does not act soon, particularly on business rates, more retailers will fall by wayside, meaning fewer pounds in the Government’s coffers.