Retailers seek online sales tax amid high street crisis

20/05/2019

Retailers have called on the government to introduce an online sales tax in order to fund a reduction in business rates for brick-and-mortar retailers, as the number of high street businesses collapsing continues to increase.

Tesco CEO Dave Lewis called this month for business rates to be cut by 20%, with the reduction to be covered by a 2% “targeted levy” on the revenue of online retailers.

The head of the supermarket chain said it was “impossible” to ignore the increasing strain on the physical retail sector and the subsequent unfairness of current business rates, warning: “It doesn’t matter whether you are a large retailer such as Tesco, or run an independent corner shop – business rates have a huge impact on every brick-and-mortar retailer. This is unsustainable.”

High street businesses across Britain have struggled to stay afloat as rising rent and wage costs combine with reduced footfall and disruption from e-commerce to dent profits. Statistics published by PwC indicate that a net total of 2,481 stores closed on the UK’s top 500 high streets last year, marking a dramatic 40% increase from 2017.

“Outdated” system causing uneven playing field

In light of the crisis facing high street businesses, Mr. Lewis says that the current system of business rates is “outdated, not fit for purpose, and doesn’t reflect the way people shop today.” The Tesco CEO notes that the supermarket chain’s headline rates bill has doubled in the last ten years to £700m, with the total rates paid by physical retailers now topping £7.5bn.

“Our business rates system has barely evolved since 1988, yet the way people shop has changed profoundly,” Mr. Lewis highlighted, citing the exponential rise of online shopping and the waning sales figures seen by brick-and-mortar retailers. The Tesco head acknowledged that “healthy competition between shops and online is good for customers, and drives innovation,” but countered that “the ability to compete is undermined when the playing field between shops and online is not level.”

CBI urges “fundamental rethink” of retail tax system

The Confederation of British Industry has similarly voiced concerns that steep business rates are affecting the number of store closures, with president John Allen urging that the current system of taxing retailers is in need of a “fundamental rethink”.

Meanwhile, Timpson’s chief executive and founder Sir John Timpson has also expressed support for Tesco boss Dave Lewis’ proposals, stating that the current system is restricting competition and leading to insolvencies. A slew of major retailers with expensive, long-term leases including Homebase, Mothercare, New Look and Carpetright entered into CVA agreements last year in a bid to cut costs, as low sales and high tax pressures make rent commitments increasingly unsustainable.

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Are you owed money by a retailer?

With pressures on the high street it is essential that you stay on top of the credit limits you grant retailers and watch carefully for any late payments.

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It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.

See the section below – About CPA.

Are you also at risk of collapsing?

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CPA is passionate about late payment

The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.

We are passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.

If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.

As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.

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Read our blog here on how to crack down on the late payment culture.

Read our blog here on how to give late payers the slap they need.

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See our full blog and FAQ on late payment compensation

About CPA

The Credit Protection Association can help!

Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.

At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.

We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.

Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.

If you supply to retailers or other at risk sectors, help us help you identify the risks.

Why use a third party collector?

As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.

Over the years we have collected billions in overdue invoices for our customers.

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