Tesco chief executive Dave Lewis was on the nail when he called this week for radical change to the business rates regime, which is holding back the retail industry’s success.
He urged the creation of a 2% charge on products sold online. That would raise £1.25bn, which could be used to relieve the unfair tax burden, epitomised by business rates, shouldered by retailers with bricks-and-mortar stores.
Some would no doubt disagree with Lewis and among them might be John Lewis Partnership chairman Sir Charlie Mayfield. He argued earlier this year that the success of a new breed of company should not be punished.
He wrote in an article for The Daily Telegraph: “The free marketeer in me struggles with the notion that businesses should be penalised just because they have business models that use fewer buildings and fewer people. That seems like fair competition and the challenge should be for others to rise to it.”
“Central Government remains obsessed with Brexit and turns a deaf ear to the problems affecting real-life retail now”
However, you could turn the argument around. It’s a struggle to see why businesses should be penalised because they use more buildings and more people. That’s what happens to retailers now, despite the fact that the full employment and thriving neighbourhoods they help create are highly prized by society.
That seems unfair and the challenge should be to create a more equitable system.
Whether or not you agree with the idea of some sort of online tax, the case for rates reform stands up on its own merits.
It’s not an attack on new ways of doing business, it’s a call for fairness – companies that make money from society should contribute to it equally.
Shops play a key function in the multichannel environment, both as part of the supply chain through click and collect and because their owners are also investing in digital innovation. The out-of-kilter costs of bricks and mortar reduce what’s available to invest.
While many retailers have been going through the mill, the rising demand for a change to business rates is not a plea to keep failing companies in business – if they lose touch with customers, a cut in rates will not preserve them.
Change is actually needed on behalf of flourishing companies, such as , because ever-growing costs pose a threat to that success.
Tesco has a margin ‘ambition’ of between 3.5% and 4% by 2019/20. It’s hardly profiteering, is it? Such thin margins are a reminder of how hard-won profitability and consumer appeal are.
As Lewis asked in his Mail on Sunday interview, “has the Government thought through what happens when retail starts to decline and if the job losses start to become significant?”
Were online businesses to face a new charge, it would certainly need to be carefully handled.
Etailers, which have brought innovation, convenience and value to shoppers, no more deserve to be unfairly burdened by costs than retailers with shops.
While a tax might be small change to Amazon, it could threaten start-ups and other small companies, so there would certainly need to be some sort of limit set – perhaps a minimum level of sales or profits.
Business rates battle
The debate about rates is of course taking place in the context of the general – and too often, eye-catchingly low – contribution of tech giants such as Amazon and Facebook to the UK taxman.
As Mayfield put it: “The central argument at the moment is focused on the burden of business rates but it’s very difficult to address business rates in isolation without addressing the wider system of taxation.
“And this starts to get to the crux of the issue, because the real issue for politicians, and actually for us as a society, is the structure of taxation.”
On that point, Lewis and Mayfield might agree.
However, the business rates system is crying out for urgent change and, unlike the complex international arrangements that affect what multinational powerhouses pay and where, it’s a system the UK Government can change itself.
“Retailers should hammer home to MPs of all parties the impact on their voters of high business rates and store closures”
But central Government remains obsessed with Brexit and turns a deaf ear to the problems affecting real-life retail now.
Retailers should take the battle to constituencies and hammer home to MPs of all parties the impact on their voters of high business rates and store closures that threaten to hollow out communities.
When retailers close shops, for instance, they should write to the local MP about what part costs played, pointing out that the disappearance of their shop may well affect the appeal of the local high street and cost more jobs.
It is the job of politicians to find solutions to problems. Lewis has lit the touchpaper on the rates issue and put the debate centre stage again.
Now, retailers should seize the moment to press their case with renewed vigour and at a political level where they can make their voices heard.