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Sainsbury’s and Marks & Spencer clash over online tax plans

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A battle is shaping up between major retailers over whether the UK should introduce an online sales tax, with Sainsbury’s demanding it to help revive struggling high streets while M&S argues it would have the opposite effect.

A day before the government’s three-month consultation on changes to business taxes closes, the finance director of Sainsbury’s reiterated calls for an increase in taxes on digital retailers to fund a reduction on the business rates levied on physical stores.

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However, the finance head of Marks & Spencer, said an online sales tax would “punish” retailers that had worked hard to shift into modern ways of selling and leave them with less cash to invest in their high street estate.

Kevin O’Byrne, the chief financial officer at Sainsbury’s, which owns Argos and Habitat as well as its supermarkets, said: “High business rates on shops is destroying high streets up and down the country. We urgently need fundamental business rates reform.

“We urge the government to introduce an online sales tax that funds a reduction in business rates for retailers of all sizes and levels the playing field between physical and online retailers.”

O’Byrne’s position contrasts with that of his counterpart at M&S, Eoin Tonge, who said: “Far from levelling up, an online sales tax would lock us down. It would make it even harder for the retailers the consultation is purportedly trying to help to invest in the digital transformation required to survive and grow in the modern, digital era.

“The solution we need is practical, pragmatic reform of business rates and better taxing of global players to ensure everyone pays their fair share.”

In a letter to the chancellor, excerpts of which were published by the BBC, Tonge said that putting an additional tax on retail, which he said was “already overburdened”, would “simply mean retailers cut their cloth accordingly”.

“This rationalisation will always start with the least profitable parts of a business – which, in the case of multi-channel retailers, will more often than not be high street stores,” the letter said.

M&S appears to be an outlier among retailers on the subject. Two weeks ago a “retail jobs alliance” of heavyweights in the sector, including Sainsbury’s and rival supermarket chains Tesco, Co-op and Morrisons, jointly called for an overall cut in business rates for all premises and said they were “open to the possibility” this could be funded through an online sales tax.

The new group – which also included Greggs, Waterstones, B&Q-owner Kingfisher, the union Usdaw and the industry bodies representing independent retailers and convenience stores – said an online tax would help “level the playing field” between internet retailers and bricks-and-mortar stores at a time when Covid-19 has further shifted shopping habits online.

Members of the alliance employ more than a million people across the UK, representing one-third of jobs in the entire retail sector.

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