Tesco quietly building support for online sales tax

Tesco has been quietly building up support for its plans to overhaul business rates, with finance chief Alan Stewart writing a series of letters to the bosses of rival retailers.

The boss of the UK’s biggest supermarket, Dave Lewis, wants the Government to cut business rates by 20% and make up the shortfall with a 2% levy on all online retail sales.

In a letter seen by PA, Mr Stewart has written to rivals asking them to support the plans publicly, although not everyone is convinced.

Tesco CEO Dave Lewis
Tesco CEO Dave Lewis is building support for business rates reforms and an online tax (Joe Giddens/PA)

It is understood that at least three of the UK’s biggest supermarkets have been sent a letter, although other non-food retail chiefs have also received the note.

According to sources, Mr Lewis has been speaking to retailers at industry events in an attempt to win over their support.

One source said: “Whenever Dave has received positive feedback, he is getting Alan to write a follow-up. Lots of retailers agree with him.”

Mr Lewis has attempted to lead the charge on business rates, following years of pressure and campaigning from the industry to overhaul the system, which charges rates on every commercial property in the country.

It comes as Tesco announced a huge 4,500 round of redundancies, several months after cutting a further 9,000 jobs – with business rates blamed in some quarters for the need to cut costs.

Retailers have complained that online rivals, including Amazon, Asos and Boohoo, are able to undercut the high street because the rates on rural warehouses are far lower than in town centres.

Rates are calculated based on the rental value of the property.

Co-op is one of the supermarkets which is supportive of Mr Lewis’s plans.

Chief executive Steve Murrells told PA: “There’s not a week goes by when another household name either announces it’s closing or markedly reducing its presence on the high street.

“There is clearly a reset occurring on the high street and as has always been the case, businesses need to evolve in line with their customers and their customers’ needs.

“But there is a bigger picture here. Derelict and abandoned high streets doesn’t only tell a tale of lost jobs and reduced economic activity in our town and city centres.

“It tells a tale of spaces that were once positively used to connect people physically with their town and each other.”

His comments come in the same week Revo, the representative body for the UK retail property sector, published an open letter to new Chancellor Sajid Javid calling for an urgent review of business rates.

Revo said the Government needs to make the UK attractive to international business, but rates are undermining it.

It added that the property tax is “damaging to business and out of place in 2019”.

However, not everyone is convinced by Mr Lewis’s plans.

A senior source at a major retailer told PA: “I don’t agree with what Tesco is proposing. We are all trying to expand our online business and this could hamper that, if we had to pay more tax for online sales. I also don’t want to over-complicate an already complicated tax system.”

The Government has tinkered with the rates system, but ministers have been loath to change it because it is such an easy tax to collect.

Robert Hayton, head of UK business rates at Altus Group, said that while business rates were here to stay and that the Government had no appetite to move away from taxing property, “there was an overriding consensus of opinion that the tax playing field had to be levelled given the tax to turnover ratio disparity”.

He added: “Tesco’s lead to build a coalition of sectoral support to achieve that would ensure that the can couldn’t be kicked down the road any longer by the new Prime Minister and his Cabinet.”

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