An online sales tax looks like a PR stunt as well as a nutty idea

Some of the country's leading online retailers have sent a letter to the Chancellor today, published in the Times (£), rubbishing the notion of a special online sales tax.

Dear Sir,

Physical retailers rightly continue to call for lower business rates on their stores. But to simply shift the burden to online retailers by imposing a new tax is a nonsense that will be detrimental for consumers, jobs and investment.

Online retailers already pay tax on many fronts. Customers pay VAT while other taxes include fuel duties, employment taxes, corporation tax, as well as business rates on their warehouses and offices. Just because the online business model does not require as much property does not mean that other areas should be taxed more heavily.

A popular view has been that bricks and mortar retailers have a high tax burden whilst a few very large international online businesses pay a small amount of tax here, therefore the tax system for all online players – big and small, UK and international – should change. But this is a red herring, an issue of domicile not online retail.

An online tax would kill entrepreneurial spirit by making it harder for smaller online retailers to get started. It would also have a detrimental effect on the supporting industries in technology, manufacturing, logistics and marketing which have been key partners in the growth of online retail. In addition many online companies are exporting to Europe and beyond which can only be achieved successfully if there is a sound base at home. At a time when SMEs in these sectors are attempting to deliver innovation, growth and jobs they should not be choked off by the unintended consequences of an unfair tax.

It is consumers that are driving the rise in online retail, both with online-only retailers and those with bricks and mortar stores and it is consumers that will be hit the hardest, particularly the poorest. The idea is vague and ill thought-out. Does it include just those retailers which operate online-only, or those with stores too? Should online travel agents be wary? Could it also capture online financial services providers? There is no logic to penalising companies that provide consumers the convenience, efficiency and value online shopping offers.

Online is a rare and precious success story for the UK and one that we should take pride in. We support our high street counterparts in their call for lower business rates, but hitting online businesses by replacing lost revenue with this type of tax will hamper growth, slow the economy, impact jobs and reduce investment whilst not achieving a significant uplift for the Treasury.

John Roberts, CEO, Appliances Online; Julian Granville, CEO, Boden; Angela Spindler, CEO, N Brown; Mark Sebba, CEO, The NET-A-PORTER Group; Holly Tucker, CEO,; Tim Steiner, CEO, Ocado; Alex Baldock, CEO, Shop Direct

The British wine industry is an apposite microcosm of the street-versus-online battle. Big high street chains like ThreshersWine Rackand Oddbins have steadily gone bust as the 'physical' side of the sector consolidates around the supermarkets, who now sell eight out of every ten bottles of wine in the UK. Despite ultra-thin or non-existent margins, they are insulated by scale in a way even a widely strung-out specialist chain like Threshers wasn't. Meanwhile online wine businesses are proliferating, with an ability to sell wine to customers in ever corner of the country without having a shop on every corner. With the exception of pseudo-supermarket Majestic and some well-run (and perhaps as importantly, well-sited) independents, the high street has become a perilous (you might say vainglorious) battle ground for wine merchants.

Of course, the lower start-up and overhead costs don't necessarily translate to success. The demise of confident web retailer Slurp shows that if you get ahead of yourself, profitability can be just as unobtainable online as on the high street.

Today's riposte by the heads of leading online retailers demonstrates the paucity of evidence for an online sales tax. I wager that when Dalton Phillips, CEO of Morrison's supermarkets, floated the idea of such a tax, it was less about good sense and more about feel-good PR. At a time of revelations about big corporations allegedly shirking taxes, there's some good copy in this for the supermarket that pitches itself as a cheerful man-of-the-people retailer.

Business rates are certainly scandalously high and a drag on bricks-and-mortar retailers. Yet online retailers are not all Rolex-bedecked dotcom-preneurs fulfilling orders on Macbooks in the Bahamas. It is too lazy to argue that if some retailers are being impoverished by bad policy, the answer is to impoverish all retailers, and in particular to clobber those least able to absorb the added costs.

What's more, it is antediluvian - indeed anti-competitive - to think that when nimble online retail is one of this country's biggest success stories, the march of time and technology should wait for giants too heavy to catch up.


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