Many company bosses, who have decided to run their businesses online in order to avoid the cost of physical commercial property, have been warned that a new tax may be launched.
The coalition is currently planning to launch a tax on online retailers, in order to create a more even playing field between traditional retailers and those who have become online powers. The industry body the British Retail Consortium is looking at how online companies can be taxed, especially considering that business rates paid on commercial property has risen from £5.5 billion in 2007 to just over £7 billion in 2012. Such plans have been backed by a variety of high street bosses such as J Sainsbury's Justin King, who have called for a "level playing field".
Online companies have criticised the proposals however. Rohan Blacker and Pat Reeve, founders of online retailer sofa.com have suggested that this new tax would "hit at the heart" of major industry growth in the UK, whilst also being "a barrier to entrepeneurship" for small businesses. Writing a letter to Danny Alexander, the chief secretary to the Treasury, Mr Blacker and Mr Reeve added that this tax would cause a decline in consumer choice, meaning that the economy will only suffer in the long term.
Mr Reeves and Mr Blacker said: “Sofa.com, like all profitable online retailers, already pays significant corporation tax and VAT. We employ lots of people who pay national insurance, and all our shareholders also pay tax. It is the consumers who decide which retailers are successful – this is market forces at work. Taxing online retailers won’t change this, but most likely lead to a reduced consumer choice online."
Sofa.com was founded in 2005 and in the year to February 2013, sales rose by 30 per cent to £16.8 million.