• Committee report on business rates includes suggestions for a transaction levy on online retailers
  • BRC does not think the current proposals fully address retailers’ concerns
  • British Council of Shopping Centres says investment is needed to improve transparency in valuation system

MPs have urged the government to consider introducing a tax on online-only retailers to level the playing field with bricks-and-mortar shops.

A report from Parliament’s Communities and Local Government Committee today said a “transaction levy” should be looked at for etailers as they pay less in business rates than high-street retailers.

“There has been a recent increase in online businesses which, occupying premises with low rateable value or being home-based, pay low business rates in proportion to their turnover,” the report said.

The Institute of Revenues Rating and Valuation has suggested the issue should be dealt with by a “transaction tax […] operated by the retailer themselves as part of the selling process”.

The government, the report added, should consider “how to ensure that revenue from online businesses is captured by local government, for example by a transaction levy on internet retailers”.

Longstanding issue

The amount online-only retailers pay in business rates compared with bricks-and-mortar rivals has proved an issue of contention for some time.

Former Sainsbury’s boss Justin King said in February the “unbalance” in business rates “clearly has to change”.

In March’s Budget, Chancellor George Osborne revealed business rates will be based on the Consumer Price Index (CPI) instead of the higher Retail Price Index. However, some in the industry were disappointed the change did not go far enough and will not come into effect until 2020.

Today’s report also points to a need to improve transparency in the valuation system used to determine the amount of tax businesses are required to pay.

”We do not believe the current announcements to devolve business rates would on their own address the serious concerns we have raised about the sustainability of a tax system which has increased dramatically since 1990”

BRC

In written evidence, the BRC said it “welcomes the ability for local government to reduce the burden of business rates which are among the highest commercial property taxes in the world”.

However, it added: “We do not believe the current announcements to devolve business rates would on their own address the serious concerns we have raised about the sustainability of a tax system which has increased dramatically since 1990.”

The group concluded that it “does not support total localisation of business rates which would complicate investment decisions and risk local growth”.

The British Council of Shopping Centres acting chief executive Edward Cooke said: “We welcome this report, and in particular the points it makes on the need for government to invest in improving transparency in the valuation system, reduce the number of speculative challenges, and make clearer the separate roles and functions of the Valuation Office Agency (VOA) and Valuation Tribunal for England.

“The VOA should be more transparent with the information it uses to determine the tax that businesses are being asked to pay.”

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