Monday 19 August 2019

Local authorities face a rates rout

'In 2018 Amazon, which had UK sales of £8.8bn, paid rates of just £63m.' Photo: Reuters
'In 2018 Amazon, which had UK sales of £8.8bn, paid rates of just £63m.' Photo: Reuters

Investors won't be the only ones to suffer from the shift to online retailing. The country's local authorities face the prospect of seeing a large chunk of the €1.47bn which they collect in rates every year disappear.

When domestic rates were abolished in 1978, councils attempted to partially compensate for the lost revenue by hiking commercial rates instead. In 2017 they collected €1.47bn in commercial rates, broadly unchanged on the previous year.

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Unfortunately the Department of Housing, Planning & Local Government doesn't break out rate receipts by sector. However, it is reasonable to assume that a significant proportion of the commercial rates take comes from the retail sector.

Which is something that puts stores at a huge disadvantage to online retailers. In the UK Tesco boss Dave Lewis has been at the forefront of a campaign against what he claims is the unfair advantage which the likes of Amazon enjoy compared to companies like his own when it comes to commercial rates.

In 2018 Amazon, which had UK sales of £8.8bn, paid rates of just £63m. By comparison Marks & Spencer paid £184m in rates on sales of £10.7bn while Tesco paid £700m of rates on sales of just under £64bn. At least the online giants are paying some rates in the UK. As most of them do not have retail operations in this country, very few of our local authorities receive anything in rates from them.

Lewis has called for the introduction of an "Amazon tax" which would see the online giants pay a 2pc levy on their sales. If implemented this would see Amazon pay an extra £176m a year to the UK taxman.

According to Lewis, retailing is facing a "lethal cocktail" of pressures.

"The tax burden has reached the point where companies are going bust. Has the government thought through what happens when retail starts to decline and if the job losses start to become significant?"

Lewis said it is time to "shift the burden of raising the country's income" away from store chains.

Sunday Indo Business

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