Digital Start-Up vs. Brick and Mortar
- Posted by admin
- 04 October 2013
British businessman and CEO of the clothing retailer, Next, Lord Simon Wolfson, says the formation of an online sales tax backed by brick and mortar retailers would be a step backwards for the online sales industry that could virtually wipe out digital start-ups. Wolfson states that the small but fast growing internet-based companies operate on extremely thin profit margins and an additional tax burden could spell the end of registration for them.
High Street Stores Support Tax on Internet Retailers
Supermarket magnates, Justin King, of Sainsbury’s and Dalton Philips of Morrison’s are among those who have spoken out in favor of the incorporation of a tax on internet retailers. King and Philips join a growing number of high street retailers calling for the tax on internet retailers in an effort to level the playing field for brick and mortar shops that do collect and pay sales taxes to the government. The registration of increased sales over the years for internet retailers has been a bone of contention for high street shops that must pay the taxes that they believe digital start-ups have evaded. Their opponents see this move as vengeful and unnecessary.
Conservatives Oppose More Taxes
Others, like Wolfson, who oppose the tax, call it a step in the wrong direction for a country that is poised to become a leader in the internet sales arena. A conservative peer who calls the proposed tax “protectionism,” Wolfson predicts that the formation of such a tax will cause the price of consumer goods on the internet to rise as the tax would simply be passed on to consumers in the form of higher prices. Tim Steiner, of Ocado, Alex Baldock, of Shop Direct and Julian Granville, of Boden agree with Wolfson, stating in an open letter to politicians that “an online tax would kill entrepreneurial spirit by making it harder for smaller online retailers to get started.”
A Call for Tax Cuts
Additionally, retailers like Angela Spindler of N Brown, John Roberts of Appliances Online and Holly Tucker of notonthehighstreet.com are calling for an actual cut in business rates paid by their competitors, stating that the level of the taxes collected now, along with the addition of taxes on internet retailers will only serve to be detrimental to all consumers as well as jobs and investments. They go on to state that simply shifting the tax burden to online retailers by the formation of a new internet sales tax is not the right answer to alleviating the problem of ever-increasing taxes on the nation’s stores.
Clearly the controversy will continue between high street shop keepers who must collect and pay sales taxes and online retailers who, thus far, have gotten away with selling their goods without adding tax to the consumers’ final costs. High street shops, however, may be mistaken in their assumption that adding a tax burden to the internet retailers will bring customers flooding back to the stores. Many consumers will continue to shop online based solely on convenience.