Lord Simon Wolfson, the chief executive of UK fashion retailer Next, recently spoke out about the urgent need for reform in the country’s business rates system. He emphasized the necessity of a 35% reduction in retail business rates and proposed a 50% increase in taxes on warehouses used by online businesses. Lord Wolfson pointed out the imbalance in the current tax structure, warning that if changes are not made promptly, many shops could be forced to shut down, especially in the midst of the ongoing pandemic.
Despite these calls for action, the UK government, led by Chancellor Rishi Sunak, is likely to postpone any decisions on business rates until later in the year. This delay is viewed as a strategic move to wait for the economic uncertainties stemming from the pandemic to subside before implementing significant changes.
Lord Wolfson drew attention to the significant gap in rates between brick-and-mortar retail spaces and online warehouses, arguing that the tax system no longer reflects the true value of these properties. Using Next as an example, he highlighted that while in-store sales have dropped by 25% since 2015, business rates have increased by 9%, creating an unfair disadvantage for traditional retailers.
While there have been discussions about implementing an online sales tax to level the playing field between physical and digital retailers, Lord Wolfson opposed this approach. He argued that such a tax would end up being passed on to consumers and would not encourage them to return to physical stores. Instead, he suggested a model where online businesses pay a percentage of their turnover or profits to prevent tax avoidance and ensure fair competition in the market.
By advocating for a fairer tax system that addresses the challenges faced by traditional retailers in competing with online giants like Amazon, Lord Wolfson aims to support a level playing field for all businesses. By acknowledging the changing landscape of the retail industry, he hopes to maintain a competitive environment while safeguarding the interests of brick-and-mortar stores.
To read more about the challenges faced by traditional retailers amid the rise of e-commerce, click here.
For further insights into the impact of business rates on the UK retail sector, visit this article.
