UK’s online-only retailers slam proposed tax proposals

Online-only retailers including Ocado and Shop Direct, in a written letter to George Osborne, have slammed proposals for an online sales tax proposed by Sainsbury's, Morrisons and Topshop.

The open letter to the chancellor sympathises with bricks-and-mortar retailers pushing for lower business rates on stores, even as it dismisses as "nonsense" plans to shift the burden onto online retailers via a new tax.

Justin King, chief executive of Sainsbury's, kicking off the debate last month accused the government of creating an "unlevel playing field" due to the discrepancies caused by tax paid as part of high-street retailers' business rates, which were based on property rents.

The chiefs at Ocado, Shop Direct, Appliances Online, N Brown, The Net-a-Porter Group, notonthhighstreet.com and Boden have blamed the online sales tax debate on Amazon's alleged tax avoidance row.

They point out in the letter that a small number of international online businesses paying a small amount of tax in the UK was a "red herring [and] an issue of domicile not online retail".

The seven online-only retailers are mounting pressure on Osborne claiming an online sales tax would damage consumers, jobs and investment and set back "a rare and precious success story for the UK".

The action by the chiefs comes less than two weeks after a British Retail Consortium meeting where in companies were urged to end the infighting and focus on reforming business rates.

Ocado chief executive Tim Steiner, who attended the BRC meeting, is now on a collision path with new business partner Morrisons, after Dalton Philips, the supermarket's boss, called for an online tax.

The letter said, "Online is a rare and precious success story for the UK and one that we should take pride in. At a time when SMEs in these sectors are attempting to deliver innovation, growth and jobs they should not be choked off by unintended consequences of an unfair tax."

It added, "There is no logic to penalising companies that provide consumers the convenience, efficiency and value online shopping offers."

Among the high street retailers that have called on the government for overhaul of the business rate system are Justin King of Sainsbury's and Topshop's Sir Philip Green.