Etailers including Shop Direct, Appliances Online and BrandAlley wade into online tax debate

BrandAlley chief executive Rob Feldmann described the proposed online tax as a “ludicrous and crazy idea” and said it would hit entrepreneurs hardest. He told Retail Week: “We already pay a lot of taxes - rates, National Insurance and corporation tax on our profits. The thought of having to pay another tax would cause many businesses to think twice about creating new jobs or expanding warehousing.”

Shop Direct chief executive Alex Baldock told Retail Week: “Any taxation must be fair, encourage growth and generate jobs. An online tax would fail on all three counts.”

Shop Direct and BrandAlley have joined the growing chorus of etailers voicing concerns against the idea, which has been proposed by some of retail’s top bosses including Tesco’s Philip Clarke, Sainsbury’s Justin King and Kingfisher’s Ian Cheshire in order to “level the playing field” with bricks and mortar retailers. It is not clear how the tax might be implemented.

Baldock added: “To tax new and growing industries would slow the economy, reduce investment and hit jobs. Online retail not only ensures that millions of people have an easy and convenient way of shopping, but also boosts other sectors, including technology, distribution and marketing.

“And while property may be a higher cost for bricks-and-mortar retailers, so are distribution and returns for online retailers. Why penalise someone for their choice of business model?”

The co-founder of sex toy etailer Lovehoney Richard Longhurst said: “It’s a frankly bonkers suggestion. Rates may be a problem but taxing online retailers is not the solution, it’s not even logical.

“This is the playground bullies complaining that they can’t hit the little kids because they run too fast. If Mr King is so keen on level playing fields all of a sudden, he should phone up [Wetherspoon boss] Tim Martin for a chat about VAT on pub food and drink.”

Another chief executive of a large etailer said the idea of an online tax was “ridiculous”. The chief executive said: “They need to tackle landlords that are overcharging and reduce business rates to take some of the pain.”

The boss, who wished not to be named, added that any tax would go against the current project led by Government quango UK Trade and Investment, which aims to export the UK’s online specialisms abroad.

Feldmann added that if the government is serious about kick-starting the economy, it should look at reducing business rates. “Reducing high street rates is what it should be doing. But cutting rates is a very different thing to taxing an area of the economy that is thriving,” he said.

The possibility of an online tax is being examined by the British Retail Consortium.

High street retailers pay business rates across their property estate, equating to £7bn. But online retailers proportionately pay signifcantly less due to their smaller property portfolios, which often just include warehousing and head office buildings.

But in a letter sent to chief secretary to the Treasury Danny Alexander the founders of Sofa.com, who ignited the debate at the weekend, have said that a tax on online retailers would be “bad for consumers, business, and the UK”.

Appliances Online chief executive John Roberts said: “Customers vote with their credit cards on how they wish to shop; this isn’t about a level playing field, this is about customer choice, service and convenience. John Lewis stores are thriving because they provide a great in-store environment and service. Our business is thriving because of our focus on amazing customer service, and customers recommend our business through platforms such as Facebook.  Maybe we should tax word of mouth advertising on Facebook because it means retailers that can’t use such a transparent media have to pay more for traditional TV advertising?

“The UK is meant to be a vibrant economic hub of innovation. Even proposing the idea that government should intervene in channel shifts with taxes reinforces the point that a mindset change is required within retail to skate where the puck is going as opposed to employing the King Canute approach to progress. With a future facing focus on innovation, retailers like HMV could have developed iTunes in the UK and generated UK taxes.

He added: “The whole internet economy is naturally disruptive and retail is no exception. We need to embrace this, because customers are, and not try to take backwards steps. We need to raise our game and be a beacon for the rest of the world to follow. Economies based on intellectual value are more valuable economies and provide better jobs and pay for their populations.”

Treasury spokesperson said:“There are currently no plans to introduce an online sales tax, however the Government keeps all taxes under review.”