The British Chambers of Commerce president has called on Labour Party Prime Minister Andy Burnham and Chancellor John Healey to tax online sales more heavily in a bid to save high streets. The plea comes ahead of the Autumn Budget, scheduled for October 28, with business rates reform at the centre of the demands.
Haldane calls for rebalancing tax incentives
Speaking to the Guardian, former Bank of England chief economist Andy Haldane said: "The balance of tax incentives are strongly skewed towards the digital over the physical, and the large over small, and if you're serious about high streets that needs somehow rebalancing." Haldane argued that "some levelling of the playing field" was necessary, adding: "One of the reasons why high streets are dying, and some of the towns, is business rates are punitive for smaller shops."
He stressed that this issue "needs to be wrapped up with that more fundamental review of business rates and I'll hope we see that in the budget." The comments underscore growing pressure on the government to address the disparity between online retailers and physical stores.
IPPR proposes 2% tax on internet purchases
A think tank last week suggested that Mr Healey should impose a 2 per cent tax on internet purchases to support physical high street businesses across the country. The Institute for Public Policy Research (IPPR) also recommended a 1 per cent tax on click and collect services.
Aditi Sriram, an economist at the IPPR, pressed the government to "shift some of the tax burden from bricks to clicks", arguing that online retailers do not face the same hurdles as traditional high street shops. The proposals aim to level the playing field and generate revenue to reduce bills for businesses with physical premises.
Treasury defends current measures
A Treasury spokesperson responded: "We are on the side of businesses. The chancellor is giving the high street more breathing space, cutting business rates by 20% for pubs, social clubs and live music venues." The spokesperson added that this is "alongside £4.3bn to limit bill rises, funded by a higher tax rate for big online warehouses, and capping corporation tax."
"As has always been the case, decisions on tax are a matter for the chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals," the spokesperson concluded.
IPPR economist urges tax system update
Mr Sriram, author of the IPPR report, said: "Britain's tax system was built for an era when the location where you did business was closely linked to how much business you did. That is no longer the case." He noted that "as people have moved their shopping online, high street shops and restaurants continue to face large, fixed tax bills simply because they need physical premises."
"The government should shift some of the tax burden from bricks to clicks and use the money to cut bills for the businesses that bring people onto our high streets," Sriram added. "Online shopping is here to stay. The question is whether the tax system catches up with the economy we now have." The Autumn Budget on October 28 will reveal whether the government heeds these calls.
