Andy Burnham, the newly elected Labour MP for Makerfield, faces growing pressure to implement a two per cent tax on all online sales to help fund a substantial 37 per cent reduction in business rates for physical stores. This proposal comes from the Real Rates Reform Alliance, a coalition of business groups advocating for a fairer taxation system amid growing challenges for traditional retailers.
The Alliance argues that Britain’s current business rates system is “broken and unsustainable,” placing undue strain on high street firms while digital businesses benefit from lower contributions. They propose scrapping the existing property tax structure and replacing it with a “hybrid” system that better supports brick-and-mortar establishments.
Ros Morgan, chief executive of Heart of London Business Alliance and chair of the Real Rates Reform Alliance, emphasized the need for reform. “Business rates should support growth, not hold it back,” she said. Morgan praised Burnham for acknowledging the unfairness of the current system but urged him to take bolder steps to equalize conditions between online and physical businesses.
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The coalition has brought together a broad array of business organizations, offering a practical and credible reform plan aimed at protecting high streets, encouraging investment, and creating a tax environment suited for today’s economy.
Anna Leach, chief economist at the Institute of Directors, also voiced support for significant reform, stating, “The time has come for fundamental reform.”
Currently, digital firms pay only nine per cent of total business rates despite representing about a fifth of the UK’s economic activity. In contrast, retail and hospitality sectors contribute 34 per cent of business rates while accounting for just around 9 per cent of the economy, highlighting the imbalance the coalition seeks to address.