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UK Retail Giants Press For Government Reform On Business Rates
Leading UK stores have urged the government to consider reforming business rates, as a result of reported imbalance of taxes compared to e-commerce stores.
In a letter to the Chancellor of the Exchequer, Rishi Sunak, 17 key retail chains urged the Chancellor to “rebalance the tax base.” Asda, Morrisons, and Tesco were three of the 17 frustrated brick-and-mortar retail owners. They argued that the tax on commercial property had grown disproportionately over the previous years. The result is that e-commerce companies, such as Amazon, paid significantly less tax than the bricks-and-mortar retailers.
In the letter, the signatories requested a slash of a property’s rateable value from 50% to 35%. Many e-commerce businesses pay less business rates than their high street counterparts because their warehouses are located out of the city, where value of buildings can be much lower.
The physical retailers focus on Amazon as their case study for the disparity. With their UK sales at £19.3 billion (a 51% increase from 2019), yet they only paid around £71.5 million in business rates tax. This works out at around 0.37% of their sales. Alternatively, physical retailers are each paying around £8 billion in business rates per year.
The government is considering their best methods for tackling this disparity, which has undoubtedly been emphasized by the COVID-19 crisis. Bare highstreets and a huge rise in online shopping has seen a significant sales increase for the likes of Amazon, Asos, and Deliveroo, with little taxation increase. Parliament rumours report a potential “online sales tax,” to level the playfield for bricks-and-mortar establishments, as well as an “excessive profits tax” for big e-commerce businesses who excessively thrived as a result of COVID-19.
Treasury Announces Flexible Initiative for Repaying Bounce Back Loans
Chancellor of the Exchequer, Rishi Sunak, announces that businesses will have more time to pay back the COVID-19 Bounce Back Loans. The unexpected elongation of the virus’ impact has pushed the government to consider the impact on local businesses. The treasury announced the change on friday evening, reporting their motivation to ‘ease the burden’ for millions of firms struggling to make the payments.
New Pay-As-You-Grow Initiative
- Extension of loan period from six to ten years
- Interest-only payments for six months, up to three times throughout the loan period
- Suspension of repayments for six months (if six payments have already been made)
Bounce Back Loan
Launched in April of 2020, the loan has supported more than 1.4 million small businesses impacted by the pandemic. In total, more than £45bn has been borrowed to keep businesses afloat, with each business able to borrow up to £50,000.
Rishi Sunak elaborates on the Treasury’s decision. “Businesses are continuing to feel the impact of extended disruption from COVID-19, and we’re determined to give them the backing and confidence they need to get through the pandemic,” he explains. “That’s why we’re giving Bounce Back Loan borrowers breathing space to get back on their feet, through greater flexibility and time to repay their loans on their terms.”
A report by the National Audit Office that up to 60% of the Bounce Back loans may never be repaid. BDO, leading Accountancy firm, suggests that 49% of medium sized businesses will struggle to stay open if lockdown continues. They go on to explain that this is “a critical part of any post-pandemic recovery.”
Business Secretary Kwasi Kwarteng explains that, “while our vaccine rollout is moving at an incredible pace and the end is in sight, we know times are still tough for many companies and extra support is needed.”