High street retailers pay 755% more in rates than online rivals, research shows

May 23, 2022

Traditional retailers are paying 755% more in business rates than their digital competitors, according to new analysis.

Real estate advisory firm Altus Group says that for every £100 earned by large retailers in Great Britain (excluding non-store sales and fuel) £2.91 is owed to local councils in business rates.

For large online-only retailers, however, total business rates per £100 in sales are just 34p.

Estimates suggest that a revenue-based online sales tax of 1% for UK customers, above an allowance of £2m for smaller firms, could raise around £1bn a year.

Robert Hayton, UK president at Altus Group, said: “Ringfencing that revenue and targeting it to actually cut rates for retail, leisure and hospitality premises could lead to a reduction in rates of about 9%.”

It comes just days after the government closed a consultation into the possible introduction of a digital sales tax as a way to pay for a reduction in business rates.

The world’s tax authorities have been trying for years to decide how to handle large online-only companies, such as Amazon, who officially report their British retail sales in low-tax jurisdictions.

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UK retailers are divided.

Kevin O’Byrne, the chief financial officer at Sainsbury’s, which owns Argos and Habitat as well as its supermarkets, said the government should go ahead with the tax, as the current business rates system is “destroying high streets up and down the country”.

But his counterpart at M&S, Eoin Tonge, said: “Far from levelling up, an online sales tax would lock us down. It would make it even harder for the retailers the consultation is purportedly trying to help to invest in the digital transformation required to survive and grow in the modern, digital era.

“The solution we need is practical, pragmatic reform of business rates and better taxing of global players to ensure everyone pays their fair share.”

Mr Hayton, from Altus Group, added: “No solution will be easy nor perfect but, if left unchecked, could lead to the substantial extinction of the high street and the erosion of local communities.”

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