Realist, not conformist analysis of the latest financial, business and political news

Tesco, Business Rates, Online Sales Tax – Make Someone Else Pay, Not Tesco!

This is one of those entirely normal proposals from business to government – screw everyone else and increase our profits. Which is really what Tesco is saying here with their proposals about business rates. For what they’re saying is that people like Tesco, who occupy expensive retail property, should have to pay less of the tax which is levied upn expensive retail property. Then everyone else who doesn’t use expensive retail property should pay more of that tax being levied upon what they don’t use.

You know, screw everyone else and I’m alright, Jack.

No, that really is what they’re saying:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Tesco has urged the government to impose a 2% online sales tax to help pay for a cut in business rates for shops, saying the current system is unfair and is damaging communities across the UK. In written evidence to a Treasury select committee investigation, the UK’s largest retailer – which pays about £700m a year in business rates, making it one of the biggest payers of the property-based tax – has made detailed proposals for a shake-up of the system, which has been partly blamed for the problems facing high street shops. [/perfectpullquote] [perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] The supermarket suggests the government could raise £1.5bn via an online sales levy of 2% on physical goods, as defined by existing VAT regulations. Tesco says the government could use that revenue to fund a 20% cut in business rates for all bricks-and-mortar retailers. It says small businesses could be exempted from the online sales levy. “There is overwhelming evidence that the business rates system is not equitable and is damaging investment and growth,” Tesco said in its submission. [/perfectpullquote]

The first thing we’ve got to get straight is that business rates aren’t incident upon the tenants. Sure, they’re the people who hand over the cheque, but they’re not, in the economic sense, the people who actually carry the burden. That’s landlords and we like taxing landlords.

The argument is simple enough. We like taxing land because no one’s making it any more. The supply of land is thus extremely inelastic with respect to the taxation or price of it. This means that if we gain our tax revenue here we do so with the least possible of the distortions we don’t like in the economy. Everyone from Henry George to Milton Friedman is agreed here.

Secondly, how much anyone is prepared to pay to occupy a shop is the price they’re prepared to pay. How that price is split between government and the landlord doesn’t matter to the tenant. If we’re only willing to pay £100 and the total price is £110 then we’ll do something else. Thus, if we raise the tax on occupancy of a building the rent to occupy that building goes down. We do know this – when we lowered business rates in enterprise zones then rents went up. So, it’s the landlord paying the business rates really.

So, what’s the whinge here then? That Tesco owns a lot of its retail premises. Thus it is really carrying the burden of that taxation because it’s the landlord. And what they’re suggesting is that as landlord they should be paying less tax. And that’s it.

Well, except for the fact that they’re then insisting that everyone else has to pick up the tax burden they’re shedding.

That is, Tesco’s real comment here is make some other bastard pay taxes to increase our profits. To which the correct response is:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]So, no, fuck off.[/perfectpullquote]

Quite, and the horse you rode in on.

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Jonathan Harston
Jonathan Harston
5 years ago

All the online retailers have to do is have an on-site shop, and bingo! they’re a bricks-and-mortar retailer and get the same tax discount as Tesco.

James Bayley
James Bayley
5 years ago

This sounds right but smells wrong. A consumer is going to pay £10 for a DVD in Amazon or Tescos. If he buys it in Amazon the taxman collects £2.20 (say) if he buys it in Tescos the taxman gets £4.00.

* Is Amazon making profits because it is more efficient or because it more tax efficient?

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