Ashley calls for immediate 20% tax on online sales
4 Dec 2018
Sports Direct founder Mike Ashley has claimed that the high street is ‘already dead’ due to the impact of the internet on consumers, and that the only way to redress the balance would be to institute a 20% tax on online sales and massive cuts to business rates
4 Dec 2018
Appearing before the housing, communities and local government committee, Mark Prisk MP asked Ashley what he thought were the root causes for high street closures and what timeframe he would put on the lifespan of the high street. Ashley said that he ‘would not even go to 2030…the mainstream high street, as we think about it today…is already dead. The question to ask is what we can do to save the minority of businesses'.
Asked why he thought this was the case, he replied: ‘It is very simple why the high street is dying - it is the internet. The internet is killing the high street…if you want to save the high street, you have to address that problem.’
Ashley described what would be needed to save the minority of shops was an ‘electric shock’ that would involve the government ‘immediately taxing the internet for the good of the high street…at a minimum a tax of 20%’.
He suggested that the tax could apply to all businesses who had more than 20% of their turnover from internet-based sales. This, he said, would prompt businesses into shifting their revenue streams away from online sales and prioritising premises in order to avoid the tax, ‘cross-subsidising stores and keeping businesses open’.
He noted that ‘Sports Direct will not be pleased with me for my suggestion. It is not necessarily a good fix for Sports Direct, but it is a fantastic fix for the high street’. He did suggest that there would be an exemption for ‘click and collect’ sales that were completed on business premises.
He also said that in an ideal scenario, local councils would ‘give companies free rates for five years’ on the condition that the business ‘matched every £1 of free rates with £1 of investment which has to go into that site’. According to Ashley, this avoided the present scenario, where empty stores produced no business rates for local authorities and acted to depress rates across a community.
In this instance, he said that landlords would have to agree to a 25% reduction in rent, ‘because why should the council not get anything and they get the full rental value’, and that the company and shareholders would have to agree to a 25% reduction in dividend payments. ‘Everybody has to put in - and if you do not help retailers, force them to reinvest. Because we have to - we need to keep 80% of our trade’.
‘Will it be perfect? Absolutely not. Will every percentage be right? No. Will somebody cheat the system somewhere? No kidding. Some accountant somewhere will find a way of fiddling the numbers and not actually spending the money on that store…you have to put draconian measures around an incentive like this’.
Ashley’s comments come at a time when there is increasing pressure on the government to level the playing field between bricks-and-mortar businesses and online retailers. These pressures led to the Chancellor announcing a 2% digital services tax (DST) in the Budget on companies that generate more than £500m in global annual revenue from business activities conducted online or more than £25m in revenue from business activities linked ‘to the participation of UK users’. However, this was described as not being a sales tax as it is contingent on content generation rather than the selling of goods.
Report by James Bunney