News that the government may bring in an ‘Amazon tax’ to help “rebalance the playing field” between physical and online retailers has been welcomed by booksellers.
After department store retailer House of Fraser became the latest high street chain to go into administration on Friday (10th August) Philip Hammond said the government “may have to look at temporary tax measures to rebalance the playing field”.
Sports Direct owner Mike Ashley stepped in to buy House of Fraser, minus its pension fund and debts, in a £90m rescue deal on Friday, saving 16,000 jobs for the time being. But the 168-year-old department store’s woes follow those of chains Toys R Us, Maplin and Poundworld, which have all collapsed this year, taking 30,000 jobs with them, while New Look, Mothercare, Marks & Spencer and Carpetright have announced plans to close hundreds of stores.
Speaking to the Guardian, Hammond (pictured) said: “We want to ensure that the high street remains resilient, and we also make sure that taxation is fair between business doing business the traditional way, and those doing business online.
“We may have to look at temporary tax measures to rebalance the playing field until we can get international agreements sorted out.”
Meryl Halls, m.d at the Booksellers Association, urged Hammond to act quickly on this “crucial matter” and to take “decisive action to bolster the declining health of the high street”.
“This can't wait till post-Brexit - the tax burden on the UK's high streets - and the advantages exploited by online retailers in the same arena - are having a parlous effect on the retail industry, one of the nation's biggest employers, and the most visible manifestation of the health of the wider economy,” she said.
“The Booksellers Association, together with many others, has repeatedly made representations to our government and parliamentarians, warning them that this was likely to happen if nothing were done to even the playing field. It's vexing that it takes high profile casualties like the House of Fraser to force the government to act, but we hope they will follow through. A ruinous business rates system affecting retailers large and small and the egregious tactic of transfer pricing by some online giants are a toxic pincer movement on our high streets, and only governments can make the difference required to allow for an equitable and fair system to be imposed."
The Chancellor's comments were also welcomed by BA president Nic Bottomley, owner of independent Mr B’s Emporium of Reading Delights in Bath, who said the high street was under “great strain”.
“I think it is great that the Chancellor is finally recognising the problem. The high street is under great strain at the moment – we have a House of Fraser under threat and have lost several restaurants such as Jamie’s Italian, Carluccio’s and a bunch of others, which leave a big hole on the high street. Something has got to be done.”
However, he said any plans for government intervention to help save the high street should be carefully thought out and not unwittingly hit physical retailers with a double tax.
“Firstly, any online tax ought to penalise companies which makes the majority of its revenue from online – maybe 60%-80% - it should not hurt bricks and mortar retailers which have set up an e-commerce site to help them survive,” Bottomley said. “They should not be taxed twice.
“Secondly, there was no mention of business rates in the Chancellor’s comments, any re-balancing of the high street has to look at an overhaul of business rates, because they are such a big part of the imbalance between the high street and online. It is a tax physical retailers pay which online companies do not.”
Bottomley further went on to say that he thought bookshops were well-placed to help lead the revival of the high street.
“I actually think that because booksellers were the first to have to combat Amazon (because Amazon initially started off selling books), we are ideally placed to be the vanguard – we know what it takes to attract customers in the twenty first century and are in a good position to look at a new format for the high street,” he said.
House of Fraser’s 59 outlets paid just over £30m in business rates last year, according to the property advisers Altus Group, on total sales of £787m. By contrast, Amazon had UK sales of nearly £9bn, but paid only £33m in business rates on its warehouse properties.
Earlier this month it was revealed that Amazon UK Services arm which includes warehouses and logistics, paid just £4.6min corporation tax, nearly half of the £7.4m it paid in 2016.
At that time Halls called the current tax system "out of date and no longer fit for purpose."
She added: “We want to see a situation where UK booksellers are no longer forced to compete with one hand tied behind their backs and that we see the establishment of a level-playing field, with the government recognising UK booksellers for the high street heroes they are, and, crucially, to bring forward the promised reform of the taxation of the digital economy so that UK booksellers are given a chance to compete.”
The trade body is also calling on people to sign a petition which would see bookshops given the same business rate discounts as pubs.
An Amazon spokesperson declined to comment.