Don’t confuse cross border with across the board

At the Tory party conference Phillip Hammond talked tough about taxing internet companies, including a suggestion that the UK would ‘go it alone’ if the international community didn’t find a solution soon. This inspired Tesco Chief Executive Dave Lewis to make his own suggestion – to impose a 2% tax on all online sales, thus forcing e-commerce businesses to contribute more evenly to the retail tax burden.

On the face of it, he has a point. Forgetting his concerns about high rents and increasing wages for a moment (because that might be considered comparing apples with pears), traditional retailers do have to pay business rates on their stores, while e-commerce businesses are only liable for rates on their storage facilities – their ‘store’ is tax-free. This disparity was particularly highlighted during last year’s business rates re-evaluation when the collective tax burden on bricks & mortar retailers increased by ￡226 million.

But I worry that such a blanket tax is aiming at the wrong target. The internet provides a much lower entry to market for micro-businesses starting out, as well as new entrepreneurs with niche, innovative products to sell. It also enables crowd funding for new products that otherwise may not get the investment they need to reach the final production stage. Is it right to introduce an additional tax barrier for these startups?

On Monday night I watched Stacey Dooley reveal the horrifying impact that big business fashion is unleashing on the global environment. Predictably perhaps, it made me want to buy clothes manufactured locally from brands with an ethos of sustainability – and a provenance I could track. All too often, these ethical brands are smaller and have to contend with higher production costs. They also tend to rely heavily on e-commerce to reach their audience – and I’m not sure taxing those businesses an extra 2% is a good idea for anyone.

The problem with Amazon, Google, Facebook and so on is not the fact that they are internet businesses, it’s that they are international internet businesses.

While the timing of the re-evaluation wasn’t helpful, I’m not sure that it’s actually unfair that digital retailers don’t pay the same business rates. Successful bricks & mortar stores are demonstrating that the in-store experience has a distinct value of its own, whether the focus is encouraging sales or building brand loyalty. We see this value close up through the efforts of our retail clients, and our staff that represent them.

Major retailers like John Lewis and Dixons Carphone also have a busy online store, allowing them to use the higher margins that their online sales generate to support their store costs (while also giving consumers the multiple buying options they seek). While I appreciate it does require investment, this multi-platform approach is open to all retailers.

Under Dave Lewis’s leadership, Tesco appears to be more targeted on the bricks & mortar grocery sector – including taking over the wholesaler Booker and launching its new discount chain, Jack’s. Perhaps this is why Mr Lewis has introduced his idea of an ‘Amazon tax’ (although it’s worth mentioning that Tesco online sales were also up in its 2017/18 financial year).

The lack of tax paid by these internet giants is depressing and needs to be addressed. But I think we should stick to taxing their profits rather than their sales, and focus the necessary change in legislation on casting a wider net to catch profits stored overseas, rather than introducing a new tax for all internet businesses.