Monday 29 October 2018

"Glaring tax divide between high street and online rivals"

The Daily Mirror does cognitive dissonance.

Compare and contrast their two tables:

£100 spent on the High Street
74p goes to Treasury in Corporation Tax
£13.20 on wages
92p on National Insurance
£2.06 on business rates

£100 spent online
20p goes to Treasury in Corporation Tax
£5.74 on wages
56p on National Insurance
26p on business rates


What are they missing/overlooking?

1. In both cases, up to £16.67 goes in VAT (the worst tax of all). That's as much as all the other taxes and wages paid by High Street retailers put together, and greatly reduces the relative difference between High Street and online.

2. I am well aware that large non-UK online sellers take the piss on corporation tax, but if High Street retailers are paying 74p corporation tax at an average rate of 19%, that means that their net profits after all costs are in the region of £4 per £100 sales, which looks OK to me.

3. It ignores the amount paid in rent, which is two or three times as much as the business rates. If included, this would increase the relative difference between High Street and online.

4. They ignore tax incidence.

a) The National Insurance (second worst tax of all) is borne by workers in terms of lower wages.

b) Business Rates are borne by the landlord, so do not increase overall costs either. For owner-occupier businesses, the business rates are largely just rent on that part of the land and buildings they never paid for in the first place - the price they originally paid was depressed by one-quarter or one-third because of the likely future business rates payable.

c) Our man of the moment, Mike Ashley, is perfectly aware of this, that's why he's going into battle with Debenhams' greedy landlords and demanding they drop the rents. Having achieved that, the business rates bills will fall of their own accord, being set at a percentage of rental values.

5. It is quite probably true that large 'online' retailers pay relatively little in business rates per £1 of sales, that's because they largely trade from out of town warehouses, where the location value is low. If High Street retailers think that they can sell as much stuff for the same price by relocating to the middle of nowhere, then good luck to them. Common sense says they can sell 2% more, or charge 2% higher prices, by simply being on the High Street, so big deal.

14 comments:

ThomasBHall said...

Well, we all know the solution that will be brought in by the Govt to fix this "glaring imbalance"- maybe even today in the budget if we're really lucky.
-A reduction in business rates to support hard working businesses (i.e. a blatant tax free gift to landowners with immediate effect)
-A new online sales tax to "level the playing field" (i.e. a blatant artificial tariff that protects/benefits owners of valuable locations)
These people are c**ts.

ThomasBHall said...

QED
"business rates will be cut by one third for firms with a rateable value of less than £50,000"

ThomasBHall said...

Partially right: "Hammond announces UK digital services tax"

ThomasBHall said...

It gets worse: "he will empower up to 500 neighbourhoods to buy land for housing for sale to local people in perpetuity"- £500m to pump land prices

ThomasBHall said...

Final jewel from Hammond: "Hammond says he is publishing the Oliver Letwin report on housing developers. It concludes developers are not engaged in land banking, he says."

Mark Wadsworth said...

TBH, indeedy. Are we surprised?

Lola said...

We live in an age of conmen. 90% of whom are in government and their satrap bureaucrats.

Mark Wadsworth said...

L, you're a small business tenant so your BR bill will go down. Tell us how much of that is swallowed by your next rent increase :-)

Striebs said...

Hammond has done his best to prevent market forces from forcing commercial landlords to accept lower rents .

If all that does not work , he has arranged them a life raft by making it easier to convert the usage from retail to residential .

If he was genuinely interested in revitalising the high street he might do the opposite :-
- increase business rates and spend the money collected on services which would help retailers ; e.g. make free parking available .
- make it harder to convert from retail to residential .

How long Will Hammond and his landlord friends be able to continue to buck the market and resist lower rents ?

ontheotherhand said...

Are there a lot of parallels of the arguments on both sides for the Repeal of the Corn Laws? Wikipedia reminds me that, "The Corn Laws enhanced the profits and political power associated with land ownership." Eventually, with cheaper bread, the population could buy other things like manufactured goods.

If we put up a blockage with tariffs against mostly US internet companies, is this not an echo of tariffs against US corn farmers?

If the internet makes things cheaper for us in time and money, do we not then have more left over to choose to spend on restaurants, hairdressers, coffee shops and other services that do not sell well on the internet?

Jonathan Bagley said...

Has the Channel Islands VAT waiver for goods less than £15 been ended?

Mark Wadsworth said...

Str and OTOH, excellent points, thanks.

JB, I thought that went years ago.

ontheotherhand said...

Actually, I'll modify my point on The Corn Laws to wonder whether, all else remaining the same, the internet reducing our costs for many products also leaves additional spare money to bid up rents/mortgage multiples. Rents are merely the total income generated in an area minus the bare minimum that people expect to live on. To the extent that the internet businesses make that minimum cheaper, they are driving up house prices?

Mark Wadsworth said...

OTOH, it's a mix of both.