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Tax online retail to create 'level playing field' for high street - MPs

The government must reform the tax system to "level the playing field" between online and high street retailers, according to an MPs (BSE: MPSLTD.BO - news) ' blueprint for saving town centres.

The report by the Housing, Communities and Local Government Committee (HCLG) contains a series of proposals from tax changes to action by local authorities.

It followed an inquiry that examined pressures on high streets in the wake of several high profile retail rescues and failures - the latter including those of Toys R Us, Maplin and House of Fraser which was later bought out of administration by Sports Direct tycoon Mike Ashley.

He told the committee at a hearing before Christmas that high street retail was on its knees - adding it was not his fault.

Retailers have been battling a perfect storm of rising costs from business rates, rents and minimum wage rules at a time of falling sales amid uncertainty over Brexit.

It is estimated 150,000 jobs were lost in 2018.

In their report the MPs said the current business rates regime was "stacking the odds against high street retailers".

A key example found Amazon's bill amounted to around 0.7% of its UK turnover while bricks-and-mortar shops were paying between 1.5% and 6.5%.

The committee said balance could be restored without a complete overhaul of business rates.

:: A £675m fund to help stuggling high streets

It urged ministers, as a matter or urgency, to consider a possible increase in VAT, an online sales tax or "green taxes" on deliveries and packaging.

The committee's proposals also urged local authorities to make high streets more attractive.

It said councils must "get to grips with the fact that their town centres need to change" and create areas that are the "intersection of human life and activity".

The MPs said the operators of physical stores bore responsibility too and must adapt to offer more of what digital sellers could not and improve customer service.

Committee chair Clive Betts MP said: "The growth of online shopping has profoundly changed retail in the UK, and the knock-on impact on high streets has been stark.

"It is likely that the heyday of the high street primarily as a retail hub is at an end.

"However, this need not be its death knell."

The findings were welcomed by interest groups including the Federation of Small Businesses and the Local Government Association.

Helen Dickinson, the chief executive of the British Retail Consortium, said: "The select committee are spot on when they say, 'retailers are paying more than their fair share of tax'.

"In fact, retail accounts for 5% of the economy, pays 10% of all business tax and shoulders 25% of the UK's Business Rates bill.

"This damaging and outdated business rates system, which drives up the cost of doing business, is a major factor in store closures as well as hindering the successful transformation of our high streets."

The government dismissed the idea of an online sales tax in its response to the report.

High streets minister Jake Berry said: "We know high streets are the backbone of our economy and a crucial part of our local communities, and we want to see them thrive - both now and in the future.

"That's why the government has stepped up, putting a plan for the high street at the centre of the Budget, backed by £675m cash investment to ensure that local high streets are able to adapt and thrive for generations to come and
establishing a High Streets Task Force to support local leadership.

"And we're supporting small retailers too, slashing business rates by a third - building on more than £13bn of rates relief since 2016.

"As the Chancellor made clear in the Budget, an online sales tax would be passed on to consumers."