Tesco boss Lewis repeats call for online sales tax

Tesco CEO Dave Lewis has once again called for the business rates system to be significantly reformed, and an online sales tax introduced.

In a letter to the Daily Mail, the supermarket boss said the UK faces two choices: continue losing jobs on its high streets which impacts communities nationwide, or “put the tax system back in step with sales” to level the playing field between those which operate online and those running stores.

He wrote that 30 years on from the introduction of business rates, the system has become “outdated” and not reflective of how business is generated today. He reflected on the circa 7,500 net UK store closures in 2018 and the thousands that are expected to close in 2019, and urged policymakers to take action and ease the burden on retailers.

“Healthy competition between shops and online is good for customers, and drives innovation,” remarked Lewis, who has been vocal on this subject before.

“But the ability to compete is undermined when the playing field between shops and online is not level. The rates bill for shops is ever increasing, despite their share of sales falling. Billions of pounds have shifted online, but the rates system was never devised to fairly account for this.”

Lewis wants a 2% levy on the sale of physical goods online, which he said would fund a 20% cut in the business rates bill for all retailers. He acknowledged that Tesco – as “a major online retailer” itself – would have a large bill to pay from such a levy.

Currently, the business rates bill is linked to property – not profit – and Lewis said the shops in the UK struggling to keep their doors open still have to pay up every year, “while larger online businesses pay just a fraction”.

“Asking a decreasing number of retailers to pay ever-increasing amounts in business rates is simply not sustainable,” he commented.

“As the Treasury looks to recover the revenue from a shrinking pool, it creates a downward spiral and the burden becomes ever greater on the retailers that remain.”

Lewis said that Tesco’s headline business rates bill is £700 million, which he claimed was double what it was ten years ago. He also said a targeted tax would reduce what is currently a substantial tax – which already impacts consumers – and relieve pressure on shop prices rather than see costs passed on to the public.

Commentators, including retail futurist and former Fitch design director Howard Saunders, believe that more taxation is not the answer to turnaround ailing high streets.

He has previously called for the government “to take the foot of the gas of taxation” and said “by slamming it down in Amazon’s direction will have no good come from it whatsoever”. He questions how businesses and industries can be calling for more taxes.

“I despair people are calling for it – Mike Ashley did it,” Saunders noted.

In his letter, Lewis addressed those who say introducing a new levy would be backwards-looking, and stifle innovation, writing: “There is no reason why fair sustainable taxes should act as a brake on inventiveness.

“Existing rates exemptions and revenue thresholds would be in place to ensure those least able to pay, including small online businesses, are protected. An online sales levy could be quickly introduced, and the £1.5 billion that retailers would gain could be invested in their people, prices and stores.”