The current discussion about business rates in the retail sector is an important topic and a hot-potato being considered by the Treasury. However, seeking to tax the digital economy more punitively will do little to save the high street and redress the balance between successful and unsuccessful retailers. This is according to eCommerce expert Tryzens, which argues that a more nuanced approach to taxation in the retail sector, which rewards investment and innovation, would do more to reinvigorate the sector.
MPs say they are “increasingly concerned” over the effect of business rates on high street retailers after a number of high-profile closures and thousands of job losses this year, arguing that the current structure offers online retailers an unfair advantage over brick and mortar ones. Chancellor Philip Hammond has said that he wants to find a better way of taxing the digital economy and is considering reforms to create a more level playing field between high street and online retailers.
Commenting on the current discussion about business rates and the notion of taxing eCommerce differently, Andy Burton, CEO of Tryzens, said: “Whilst there has to be a discussion about business rates for the retail sector, we welcome the current interest from the Government in how we can save our high streets. Any breaks in punitive taxation to support employment, community and convenience is highly valuable. However, simply shifting the burden of high rates from the high street to online companies is both naïve and short-sighted. The drive of online shopping is not being driven by the failure in the high street, it is being driven by lifestyle, innovation, convenience and preference, often called the power of consumerisation. Unlike fossil fuels, smoking, drinking or gambling, where taxation can have a positive impact on choice, the difference between purchasing in a physical store vs an online store is not a matter of environmental or health protection!”
“The irony is that most retailers today have an online presence and typically these sales channels of the retailer are growing disproportionately higher than the physical store sales. There is a reason for that and it is nothing to do with business rates but of consumer preference. Asking a retailer to favour one channel over another is missing the big picture of what is changing in society today and risks stifling investment in innovation, where we in Britain are leaders in the world of eCommerce,” he said.
Burton continued: “The role of the store is an important element of a retailers reach to market providing local access, with see or try-before-you-buy. However, having both channels successful is critical and the role of the store needs to be more about experience, service and engagement with the consumer than ever before. Equally, whilst online resellers may have less physical property to rent and service, they have high capital investment in technology, often having to offer free delivery and have costly services to manage returns of products, which is less of an issue in physical stores.
“A tax on eCommerce would be a tax on innovation, a blunt restriction on consumer choice, and, will ultimately drive down competition. Fundamentally though, it won’t even begin to get to the heart of the issues facing brick and mortar retailers where store locations, leases, rates and the like are an ongoing balancing act. Landlords have equally suffered through the recent spate of CVA’s and the solution cannot be found in disadvantaging the most successful growth story in the consumer world today.
“Key areas of the broad discussion are a bit of a red herring as business rates aren’t the reason why fewer consumers are shopping on the high street. It’s because the high street retailers aren’t able to offer shoppers what they want and aren’t properly adjusting to changing patterns of consumption. By that token, the current measures being considered aren’t going to bring them back. If we’re going to rejuvenate the high street, retailers need to rethink the future of the store and have a fuller discussion about the role that the high street serves in modern Britain today,” Burton continued.
“The retailers that are winning in the market today are the ones that are leveraging the latest technology to drive innovation and improve the customer experience both in-store and online. Therefore, rather than taxing innovation, I’d welcome changes to the tax regime designed to reward it, whether it’s online or in-store, and reduce the tax burden and service charges for stores that meet good community, employment and ethical standards,” he concluded.