British Retailer M&S Have Made Their Position Clear – They Do Not Want an Online Sales Tax. But Why?
Business rates (a commercial property based tax) have been rising for years, and with the looming threat of another hike, everyone is desperately searching for any other avenue. So much so, that the Retail Job Alliance was formed. Retail giants and unions have come together to push the government into action – their goal? The Online Sales Tax. This tax would be used to fund a reduction in business rates for shops.
M&S however, were not on the same page.
A few days before the government’s consultation on whether an Online Sales Tax could be beneficial ended, M&S Chief Financial Officer Eoin Tonge wrote to the Chancellor (excerpts published by the BBC):
“This rationalisation will always start with the least profitable parts of a business – which, in the case of multi-channel retailers, will more often than not be high street stores,” the letter said.
M&S argued that introducing an additional tax on retail sales would not solve the problem, but exacerbate it. Struggling brands would have no choice but to make cuts – and they would start, Tonge insisted, with high street stores. With this line of thinking, an Online Sales Tax may go from trying to save high streets, to closing them down.
But why are M&S so adamantly against this proposed tax? The recent review they published – covering the 52 weeks up to the 2nd April 2022 – might provide some clues. According to the British retailer, their online sales have gone up 55.6% during this period. Not only that, but their sales in-store decreased by 11.2%.
This data and their insistence that retail stores will be closed if an Online Sales Tax is introduced, does not inspire much confidence. Business rates can sometimes be blamed for business closures as they can be the 3rd or 4th highest cost for any business with commercial property.
Circumstances have forced many businesses to turn towards a more digital business model, but this is harder for some than others. For giants like M&S – who were already using a combined online and in-store business model – moving away from in-person stores could actually save them money. However, the introduction of an Online Sales Tax could see the playing field between online and in-persons stores evening out, and M&S would be back right where they started.
Small businesses are perhaps feeling the brunt of an impending business rates hike. The treasury have said that the funds from an Online Sales Tax would go towards seeing a reduction in business rates. While a possible reduction is certainly pleasing, for those whose property is already overvalued, it makes little difference.
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