Sainsbury's Chief Calls For New Online Sales Tax

Sainsbury's chief executive Justin King has called for an online sales tax that he says will create a level playing field between traditional retailers and ecommerce.

As we've been predicting for the last couple of months, this idea has found its feet in the US in the guise of the Marketplace Fairness Act and has made its way to Britain.

King referred to the Act yesterday in a conference call to journalists and his words follow calls from the British Retail Consortium urging the Government to reform the tax system in the UK.

'The burden of tax falls on bricks and mortar retailers and I think we need to rebalance the burden,' he said.

King was far from clear how this would play out and it sounded, to us at least, that he was asking for a fundamental tax reduction. To our minds traditional retailers make up a pretty big chunk of online sales - Tesco, Asda and Sainsbury's included so it is difficult to see how it would work to his plan or how it would work for food delivery, for example.

In the US the problem is much more straightforward. Individual states miss out when sales tax isn't paid so they simply had to think of a way to tax the transaction. The new system, if it is voted through, will mean retailers have to collect the tax when the sale is made and deliver it to the state where the customer lives.

In Britain, all retailers pay VAT no matter whether they are on or off-line. The problem is that business rates - a significant burden for most retailers - are charged on property, ie shops. The problem is compounded because shop leases can be anything from three, five, 10 to 25 years (the latter being the standard, believe it or not, when most established retailers expanded in the 1990s) long so retailers can escape them very easily.

We think the government should look at how it can recondition Britain's failing high streets but giving in to the tax demands of supermarkets is another thing altogether. And taxing one of the few industries where Britain is proving more innovative and developing a strong skills base to feed into the global race online is ludicrous.