talking trade Taxing times Industry commentator Michael Weedontakes a view on some taxing issues


government to change the way the tax works. While it’s helped to get something like 400,000 properties (not shops, note: many are offices and the like) exempted from paying any rates at all, and has moved the frequency of revaluations from five years to three, and brought about a move from annual uplifts by the not-a-national-statistic-at-all RPI (Retail Price Index) to the slightly smaller annual uplifts by CPI (Consumer Price Index), the regime remains largely as it was.


Check, Challenge, Appeal Except, that is, for the creation of the draconian Check, Challenge, Appeal process for business rates, which is sometimes referred to as the Check, Challenge, Really Don’t Bother To Appeal process. Since it (and its misfiring online system) came into operation last year, appeals have fallen by about the same amount as John Lewis’ profits. This, it has to be said, is a splendid tax for the


W


e have been caught up here before. For the second time since the worldwide financial crash, collapses


of big name retailers have worried the public enough to make headlines. Lots of headlines. Last time round, the big fatality was Woolworths.


This time it’s… well, take your pick. But now even full-on death throes are not necessary. The recent announcement that profits at John Lewis dived by 99% was greeted like the news that the barbarians were about to sack Rome, plunging Europe into centuries of cultural darkness. The downturn in the data on shop closures


actually began in the middle of 2017. But these things take time to turn into year-end accounts and apocalyptic announcements. Overall retail spending in the UK is actually still


rising, although not in all areas of trade. Food and drink prices are still inflating, but non-food prices are still falling.


Clothing turnover, in particular, is falling. Car


fuel, on the other hand, is rising. So, cost pressures continue to press on profits. The British Retail Consortium estimates net retail profitability at below 3%, so even small movements in cost can hurt.


Business rates Business rates represent costs largely unrelated to variations in what’s in the till, so they represent a natural focus for opposition. It’s obvious that pureplay etailers paying warehouse rents are only paying matching rates. And it’s equally obvious that shops with actual front doors pay more. There is a sharp focus on online retailers – but there is an even more tangled story there. There has already been one big effort to get the


44 | housewareslive.net • HousewaresLive.net • twitter.com/Housewaresnews September/October 2018


Treasury. Its subjects can’t move, and even if properties are empty, somebody has to pay rates on them after a short period. It’s a bit like an income tax that continues to be levied even after death. The government gets just under 5% of its tax income from it. A good trick: the amount it raises from just over two million business properties is almost exactly the same as the sum raised from 27 million homes. Proposed solutions (proposed on the basis that


the government might be interested, even though the Chancellor has already dropped a very big hint that he’s not) fall into two types. First, there are the ‘sweep it all away and start


again’ arguments. One suggestion is a 2% tax on retail sales to replace retail rates. This would deliver


the £8 billion that retail pays (entirely out of proportion to other sectors of the economy) - but only if it was levied on the whole of UK retail including food, non-food and car fuel. Shops would not pay rates. There are some problems here. The tax would fall, at 2%, on all retail, not just online sales. They add up to about £60 billion a year: just over half of which is from pureplay online retailers. The other nearly half is in online sales by retailers with shops. Just over 40% of retail is food and most of that is currently zero-rated for VAT but would gain 2% tax, which retailers would doubtless pass on - and food increases always hit the poorest most. In fact it’s likely that large numbers would pass on the 2% tax in their prices – but would they also pass on the benefit of lower rates? A couple of hundred thousand small shops would not see lower rates, because they don’t currently pay them.


Amazon Tax This might be one version of the so-called Amazon Tax: a special retail tax on online businesses that the Chancellor has made big and very vague noises about. Amazon is estimated to be the fifth biggest retailer in the UK, handling about £1 in £25 of total UK retail; possibly £15 billion. However, it’s also a marketplace and it looks likely that the proportion of what it sells for small third parties is similar to that in the USA - about 40%. Large numbers of small shops also sell online, some through Amazon and eBay. HMRC figures had 24,900 pureplay retailers in the


UK by the end of 2017. There aren’t 24,900 big online retailers here: there’s a handful of chunky outfits, so the vast majority must be small.


Monday February 4 2019 THE NATIONAL MOTORCYCLE MUSEUM, BIRMINGHAM


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