Web retailers should pay higher taxes to save U.K. shops: report

Web retailers should pay higher taxes to save U.K. shops: report
LONDON—Internet retailers such as Inc., Asos Plc and Boohoo Group Plc should pay higher U.K. taxes to help save ailing shopping districts that are losing revenue to e-commerce, according to a government report.

An online sales tax, higher value-added tax and “green taxes” on shipping and packaging should all be considered to help soften the blow to physical stores as consumers shift to internet shopping, according to the report Thursday from the Housing, Communities and Local Government Committee.

Tesco Plc, the U.K.’s biggest retailer, announced as many as 9,000 job cuts in January.  (DANIEL LEAL-OLIVAS / AFP/GETTY IMAGES)

Some 70,000 jobs were lost in the U.K. retail sector in 2018 as chains like Marks & Spencer Group Plc and Debenhams Plc announced plans to close hundreds of stores. Tesco Plc, the U.K.’s biggest retailer, announced as many as 9,000 job cuts in January. Internet sales are a major factor, with U.K. consumers spending more via the web than those in any other European country, and one-fifth of December retail sales made online, according to the report.

“Business rates must be made fair,” said Clive Betts, a member of the House of Commons and chair of the committee, in the report. “They are currently stacking the odds against businesses with a high street presence and this must end.”

Asos shares fell as much as 3.2 per cent in London, while Boohoo’s declined as much as 2.7 per cent.

Brick-and-mortar retailers pay more than their fair share of tax, while online retailers are not contributing enough, the report said. Amazon’s rates amount to around 0.7 per cent of its U.K. revenue, while most street-based retailers pay double to eight times that. The tech giant already faces the introduction of a U.K. digital tax from April 2020.

Amazon said it pays taxes in the U.K. and all countries where it operates and has invested more than $12 billion (U.S.) in the U.K. since 2010.

“Corporation tax is based on profits, not revenues, and our profits have remained low given retail is a highly competitive, low-margin business and our continued heavy investment,” the retailer said in an emailed statement.

Asos declined to comment on the report. Boohoo didn’t respond to a request for comment.

The retail sector accounts for about 5 per cent of the U.K.’s gross domestic product and pays 25 per cent of business rates, according to the government report.

Mike Ashley, the billionaire owner of Sports Direct International Plc, told the committee in December that e-commerce is the biggest threat to the U.K.’s shops. As a strategy to encourage retailers to keep physical stores open, he proposed a 20 per cent tax on retailers that make more than a fifth of their sales online.
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