Friday, 8 June 2018

Tesco boss - wrong facts, wrong logic.

Emailed in by Shiney, from the BBC:

The boss of Britain's biggest supermarket has blamed the collapse of some retailers partly on the expense of business rates.

Dave Lewis, Tesco chief executive, said the charges that firms must pay on their buildings played a "large part" in sending some retailers to the wall... He questioned whether raising business rates was resulting in an "uneven playing field" for some firms...

"Are we allowing it to stay competitive, or are we by stealth lowering corporation tax and increasing business rates to a place which is creating an uneven playing field and forcing people to think about how it is they avoid that cost and find other routes to the market?" he asked.

The Tesco boss said business rates was the biggest tax his company paid, adding up to more than £700m a year.


The last claim is a straight lie. To put that figure in context, it is a smidge more than 1% of Tesco's annual turnover of around £60 billion.

If he could be bothered to look at his own company's accounts for the years when VAT was reduced from 17.5% to 15%, then increased to 17.5% and then to 20%, he would know that Tesco bears about two-thirds of the VAT it pays every year.

He knows better than I do how much of Tesco's turnover is VAT-able items (basically anything except basic food), but sure as heck the VAT born by Tesco is several times as much as the £700 million Business Rates it pays.

He's wrong in logic as well.

- For premises which Tesco rents, the Business Rates is just part of the rent bill. As we know, Business Rates are supposed to be a certain percentage of the total rental value, although some individual valuations are miles out, so by definition, the official rent bill is at least twice as much as the Business Rates Tesco pays on its rented premises.

- The Business Rates on the premises Tesco which *thinks* it owns is just rent on that part of the premises which it doesn't own and never owned.

The point is that Business Rates (which have existed for over four centuries - so it's not like businesses are unaware of them) reduce the selling price of commercial premises by an equal and opposite amount, thus saving the purchaser a chunk of change up front. The government claws back the under-value via Business Rates, so the total cost to an owner-occupier is much the same with or without Business Rates.

(Clearly, the downside with Business Rates is that it is calculated on the total rental value including the occupant's own improvements. Which is absolutely no different to normal land law - if a tenant pays for improvements, legally they belong to the landlord and he can increase the rent accordingly, unless the rental agreement says otherwise.)

9 comments:

mombers said...

Surely Tesco's accounts would give a figure for net VAT paid? With any luck, employer's NI, etc too

Mark Wadsworth said...

M, there's a figure for employers NIC, £342 million or so. No figure for vat that I can find.

Shiney said...

@M

VAT does not form part of a VAT registered businesses Stat accounts - except in so far as it is a debtor or creditor at the end of the year.

You 'might' be able to glean the cash flow effect by looking at the opening v closing balance sheet entries and then, maybe, the VATable sales.... the issue is then the purchases side which includes non traded items.

All very opaque, which is how TPTB like it.

Mark Wadsworth said...

Sh, exactly.

Frank said...

The customer pays the VAT. Tesco merely collect it and pass it on.

Mark Wadsworth said...

F, wrong. It's a tax on value added. Tesco add value and pay the tax. All actual hard evidence shows this to be the case. Do you have anything to support your claim apart from politicians' lies?

Frank said...

Mark
Nothing to support my claim apart from every VAT receipt I have received where the prices of the goods are itemised along with the amount of VAT I have paid. What have you got?

Mark Wadsworth said...

F, I don't know if you're actually interested in the topic or just trolling by repeating politicans' lies which you know I saw through long ago, but assuming you are actually interested...

1. Please gen up on tax incidence.

2. Please refer to my actual real life evidence looking at price changes in VAT-able and VAT-free goods and services between 2008 and 2011 when VAT went down, then up, then up again.

Lola said...

Re 'who pays VAT?' that's what irks me about the BofE criticism of car finance PCP schemes. The low deposit ones are essentially off balance sheet government borrowing by people financing the VAT...and lesser sum for depreciation.