An online retail tax could damage small businesses, stifle innovation and would fail to curb tax avoidance strategies by multinational firms, experts have warned.
Ecommerce lobby firm the IMRG joined online retailers and business analysts to say that attempts to shift the burden of businesses rates from bricks and mortar retailers and onto online retailers would be misguided.
Former Tesco chief executive Sir Terry Leahy echoed demands from Sainsbury's chief executive Justin King last week that there should be a 'level playing field' on tax. Leahy told The Mail on Sunday that tax levies unfairly burden retailers and should be more evenly spread among telecoms firms, satellite broadcasters and online retailers.
Retailers have campaigned for years arguing for cuts in business rates. Over the past three years rates have increased by 13 per cent crippling struggling retailers and the British Retail Consortium recently relaunched its push for a business rate cut as a demand for an overhaul of the tax system.
But one online director, speaking on the understanding of anonymity, told us: 'The tax debate is about off-shore tax avoidance - not about taxing online businesses. It's crazy that retailers should be demanding that online retailers be more heavily taxed when that is where their growth is going to come from in the next few years.'
The IMRG told The Mail on Sunday that it is becoming increasingly difficult to separate online and off-line as most big ecommerce operators also have shops. Next and John Lewis both have online sales - combined with catalogue sales in the case of Next - of more than £1 billion.
IMRG chairman James Roper said a blanket tax would damage fledgling ecommerce entrepreneurs and prevent small shops diversifying online. His members include big names such as Amazon, eBay, Google, Tesco and Sainsbury's but also hundreds of smaller online firms.
'We've been anticipating this for ten or 15 years. It's right and proper than companies pay their taxes and its clear the whole Government machine has not got in tune with the online world yet,' he told the Mail. 'But there are something like 170,000 small e-commerce business turning over up to £100,000 a year and an online tax could well kill those businesses off.'
Retail analyst Bryan Roberts at Kantar said taxing online firms 'risks missing the point'. He said the more fundamental issue was the use of tax havens by multinational firms. He said an online tax would be a 'blunt instrument' to help bricks and mortar retailers cope with rate rises.
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