Tesco urges online sales tax to fund business rates cut

The grocer said that the current system was damaging to UK communities and businesses and suggested that an online tax could take pressure off high streets being adversely affected by business rates.

In written evidence to the Treasury select committee which is investigating possible changes to business rates, Tesco, which pays around £700m a year in business rates, said that the government could make £1.5bn by establishing an online sales tax, which would not include small businesses. It suggested that the government use that resource to facilitate a 20% cut to current rates.

“There is overwhelming evidence that the business rates system is not equitable and is damaging investment and growth,” Tesco said. “We believe action must be taken to avoid prolonging an anachronistic tax that has not materially changed since 1988 and is damaging communities across the UK.”

The grocer’s submission follows calls by its chief executive Dave Lewis for an ‘Amazon tax’.

This idea was welcomed by chancellor Philip Hammond last year but hit a barrier in January when the financial secretary to the Treasury, Mel Stride, said in a letter to the chair of the Commons Treasury select committee, Nicky Morgan: “The government considers there is a high risk that such a tax would be found to be state aid.”

Tesco contradicted Stride in its evidence, saying that it would, according to legal advice it had taken, be compatible with EU rules on state aid.