Businesses which trade online, thus avoiding the costs associated with a bricks and mortar commercial property, have been warned that they may be liable for a new tax.
The government is currently considering a plan to target online retailers to level the playing field between physical stores and virtual ones.
The British Retail Consortium (BRC) is taking a look at how online companies can be taxed, in light of the fact that business rates paid on commercial property have risen from £5.5 billion in 2007 to just over the £7 billion mark in 2012.
The plans are supported by a number of high street leaders, including Sainsbury’s chief Justin King, who have frequently called for a “level playing field.”
Online companies are critical of the proposal, though. Rohan Blacker and Pat Reeve, the founders of the online sofa retailer sofa.com, have said that the new tax would “hit at the heart” of industry growth in Britain as well as being a barrier to small business growth.
Blacker and Reeve made their views known in a letter to Danny Alexander, the Chief Secretary to the Treasury, stating that the tax would give consumers less choice and mean the economy would suffer in the long term.
Blacker and Reeve went on to say, “Sofa.com, like all profitable online retailers, already pays significant corporation tax and VAT. We employ lots of people who pay national insurance, and all our shareholders also pay tax.
“It is the consumers who decide which retailers are successful – this is market forces at work. Taxing online retailers won’t change this, but most likely lead to a reduced consumer choice online.”
Sofa.com has been in business since 2005. In the year to February 2013, sales increased by 30 per cent to £16.8 million.
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