“Amazon” tax won’t solve problem of business rates for retailers

Stuart Hicks, Manchester Office, Director - Dunlop Heywood

By Stuart Hicks, Director.

Prime Minister hopeful Matt Hancock has decided to go for the populist vote with his latest idea to “save” thousands of retailers from the cost of business rates.

The Secretary for Health is proposing that his new Government would introduce an “Amazon” tax which would help to “level the playing field” between “bricks and mortar” and online retailers.

I’m sure that will go down well with the members of British Retail Consortium (assuming Amazon isn’t a paid-up member) but the rates’ burden is carried by the owner of the property when a lease ends, piling more misery on landlords who are already suffering significant rent reductions.

His plan would cost around £1.5bn a year and would allow him to exempt hundreds of thousands of small businesses. In an interview with The Telegraph Mr Hancock said business rates are a “twentieth century tax which needs a 21st century replacement” – a neat soundbite but business rates in one form or another go back many centuries before that.

 Looking at it from a practical level, business rates are levied on the perceived rental value of a property at a specified time. There is obviously an amount that a tenant is willing to pay to occupy property and how that is divided between rent, rates, etc is pretty much immaterial to them. The correction to the balance between more frequent rating revaluations; something already set out by Government.

The landlord obviously has a vested interest in the process but the amount the occupier will pay is finite. More tax on the property means less ending up in the landlord’s pocket as rent. This has been aptly demonstrated in Business Enterprise Zones – where businesses locating into an EZ were exempted from business rates, we have seen rents rise.

Call me cynical, but wouldn’t an “Amazon” tax simply be a handout for high street landlords with no guarantee the benefits will trickle down to the retailers? And as business rates is a property tax it seems incongruous that Amazon and other online businesses are asked to pay more when, in reality, their business model uses less property than other forms of retailing.

Mr Hancock’s sound bite is I am afraid half baked, all the tinkering is corrupting the system. Look to Scotland for a proper thought out response to the topic where the Scottish Government is well on with adopting the recommendations of the “Barclay Report”.