An online sales tax would hit the poorest shoppers hardest

As so often is the case, it was Adam Smith who got it right, even though he was writing in 1776, long before anybody could possibly have imagined the rise of the digital economy.

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”, he warned in the Wealth of Nations.

nipntuck: We run a small british manufacturing business, who until recently were stymied by retailers demanding large mark ups, making late payments andminimum stock holdings with a 'returns' policy. The internet has revolutionised us, allowing us to double in size, sell direct to business and individuals and for us is a large part of our future. We pay VAT, PAYE, NIC, Rates and Corporation Tax and this would be the thin end of the wedge. For years the big shopping stores have squished the little guy with hardly a thought and now they ask to keep this dominance!. What a cheek. Politicians, if you read this think about the whole market not these self interested high street toads.  

RonMcLennan: There WILL be an online sales tax.  It's what TPTB are demanding. In a similar vein to many other issues, top execs are being wheeled out to espouse truly daft ideas for a day and then it's someone else's turn.  The net effect is then that the media interpret this as something being "demanded" by the public when the reality is anything but. Our government is a criminal syndicate working for offshore banks. Nobody but nobody wants an online sales tax apart from the rarified few at the top of the tree.

oldwease: The big supermarkets were quite happy to use their buying power to undercut independent retailers.  Luckily (for consumers) the  game has changed.  It is the fault of the supermarkets that they cannot compete; not one has a professional, innovative or creating online strategy. Separately, the article is correct in stating that they should be whining about business rates instead.

Joholn: A fair number of the Supermarkets when they built their supermarkets applied and and got business rates exemptions on their Car parks on the basis they were free and no business was being undertaken. On mass over the last few years they have allow the Private Parking leeches to take them over and 'Fine' (its not a fine but a speculative invoice). One of these Private Parking companies is now taking 600 people a week to court demanding £165 for breeching the car parks terms and conditions. These Car Parks on that basis are no longer free, if you get one of these tickets go to PEPIPOO for advice so you do not have to pay and contact your local council and tell them there is a business being run from a free Car Park.

Socrates: "As so often is the case, it was Adam Smith who got it right, even though he was writing in 1776" Yes - he did - he noticed "the invisible hand" - a concept ignored by all free market economists when they mention him - because ultimately that invsible hand was the inevitable monopoly power that capitalism encourages - which makes it a system of exploitation of one human over another.…but I don't expect Allister Heath to understand that - after all, he is merely a shill.

scorpion_derooftrouser:  Which is why anti-monopoly laws were enacted. But our government simply doesn't bother to apply them, it prefers to harass people exercising their freedom of speech.

Socrates: The divergence isn't online and not online - it's between big and small. Heath is just a shill for corporate Britain which is why he's so keen to cloud the debate. Every SME shouldget reduced or exemptions from business rates - larger corproations should get hammered. This wil prevent monopoly power taking over - but sadly the reverse happens as Government smash the small guy whilst allowing the corporations to avoid tax, take Govt. subsidy and abuse their market dominance.

MrVeryAngry: To paraphrase the THHGTG re the Nutrimatic Drinks dispenser - that comment is almost, but not quite entirely, complete bollocks.

Nick Name: Smith's concept of the invisible hand was that society would become better of its own accord if a true free market was allowed to operate. Which is exactly what the article is arguing (or at least that it should not become less free than it already is). So I'm not sure what your point is.

cinnamona: how on earth can they reduce rates when the money is needed for council chief executives who earn more than the PM, and of course their non-contributory (or very little) final salary pensions which they could take at 60? then add on police, teachers, whole armies of social workers and lets not forget the community liason officers (sic). if they reduce the rates who is going to pay for all that? megacorp? incorporated in luxembourg that is? perhaps some BBC types who get golden pay offs paid into their offshore service companies? someone, not me, once quipped that britain was the last colony in the british empire. and now for some horse sausages, and if i get sick , send me to hospital…

Gilobrero: We moved our business out of the UK in 2005  initially doing most business in China in the media sector we opened offices in the Philippines and  and predominantly doing business in the UK , we found our progress   wrecked by UK government policy. Thats is the right of government but it seriously hurt our UK based clients, so we shifted our focus and now do everything we can for SME's to help them offshore. Just today after a meeting with our  attorneys we had  agreed the structure to set up a retailing operation in the UK with its own website to now set up withing the next few weeks a new Philippine based corporation, and move the website, domain and hosting and its ownership to the Philippine corporation and initially around 6 new jobs to be created from the UK, including all revenue profits and taxes. That will happen more and more as web based companies  soon find the enormous advantages of off-shoring their websites. Make no mistake, we make an absolute fortune doing this and have in the last 2 and half years off-shored well over 3,000 jobs from the UK. Around half are new jobs and half lost forever from the UK. Companies thrive by doing so, although the change can be stressful, but the sheer lack of bureaucracy  the joy of virtually zero tax and the cost reduction of 65 to 75 % in salary costs and the improved customer experience either by sharing lower costs by lower prices or by charging zero VAT soon makes it self felt. It can and is being done  right now all around you. Those who post here affected and want to know more should see!ANlwnG3pdjKHzaQ&&wdSlideId=258&wdModeSwitchTime=1373993676938

MrVeryAngry: Quite.  BR is not the problem at all. It is all the other taxes on production that destroy wealth creation and hence employment.

citldave:  business rates are a con. we have a small warehouse operation on an private industrial estate. we get nothing for our rates no road, lighting rubbish collection police etc . But what we pay in rates is enough to employ 3 people. business rates create unemployment.

MrVeryAngry: No. They Do. Not. Create. Unemployment.  The problem you have is excessive rent. That is rent plus BR.  If there were no BR your rent would rise, since all profits return to rents.  The other problem you have is excessive payroll and profits taxes. Better to cut all those other taxes than BR.

DrMoonraker: It's all about stifling competition & keeping the status quo

Greg Tingey: We ALREADY HAVE A "Sales Tax" It is called… VAT.

lastfreeman: & the online firms use their tax haven subsideries to cut the effective VAT rate to around 5%, while the High St has to pay 20%.

mikekent: This is just another tax to fill up the trough in which the pigs can feed. We should be reducing taxes and not increasing them. Internet entrepreneurs will be paying income tax and VAT when their trade gets to the necessary levels is that not enough?

MrVeryAngry: Exactly.  It's all the other taxes that are the issue.  BR is probably the least worst tax out there.

Wanderingone56: Of course an online tax would hit the poorest hardest but since when, in the past fifty years, has a British government allowed the effect of a tax on the poorest to sway its decisions to tax?

nesserman: My business is conducted online and I would love to have a high street shop. I am prevented from doing so by prohibitive business rates which my small company would never be able support. Business rates stifle initiative and very few people with any sense would open a shop with such a crippling overhead in this economy. I know that local government officers take a harsh line when retailers are unable to pay their business rates, they show zero flexibility and the bailiffs are called in pretty swiftly. It's not a pleasant experience and is in itself expensive with bailiffs' costs falling on the shop owner. Were I to have a high street shop I would be creating employment which is surely a good thing. Operating online is a sensible option for me and for many  retailers. I am sure many of us would love to open shops and create employment were high street expenses less onerous. Why can't government see the sense in reducing this unfair and inflexible tax? My apologies to those who have had to read my rather boring mantra in previous postings!

MrVeryAngry: Rubbish, sorry but it just is.  Clearly your business is marginal in the area you operate in as far as renting retail premises goes.  But why worry?  If you are profitable on-line only, stay there.  If you can raise your margins to satisfy the property rent costs which is the total of rent plus BR, then you can open a shop.  Otherwise you can't.  Better to cut all other taxes and make BR levied on the landlord, which would have the effect of cutting the total property rent cost of rent plus BR.

Robert East: I am a sole trader from business premises, my rent rates and service charge are almost £24k a year… Including my tax bill for last year, I paid over £46k  for the pleasure of being self employed… That's almost the same as Amazon and Google…!

MrVeryAngry: Yep.  your 'rent and rates and service charge' are the total 'rent' for renting your premises.  If BR is scrapped your landlord will simply increase his rent to the old total of rent plus BR since that is the maximum your business can sustain.  The real problem you (and I) have is all the other taxes we pay that are levied on production - production being the combination  of the other two factors of production, labour and capital (note - 'capital' is not money). Better to increase BR and have it levied on the landlord and reduce all your other taxes and regulations.  Remember it is an economic truth that all profits return to rents.

seemstome: For years the big Supermarkets charged manufacturers to put their stock on the Supermarkets shelves and also made them provide the staff to stack it and provide the display.  The Supermarkets have put many of them out of business through this in the past. The internet allows them to fight back so more power to their elbow.