M&S Boss: Online Tax Is ‘Morally Bankrupt’

Online sales tax is ‘morally bankrupt’ and would hit consumers already struggling with cost of living crisis, M&S chief warns

  • Steve Rowe said it would force consumers to pay more for essential goods
  • The Treasury has launched a consultation on a tax on online sales
  • Mr. Rowe will present his full year results to the City next week.

By Neil Craven for The Mail on Sunday

The chief executive of Marks & Spencer this weekend condemned proposals for an online sales tax as “morally bankrupt”.

Steve Rowe warned that the discussed tax increase would hit consumers already struggling with the cost-of-living crisis and force them to pay more taxes on ‘essential’ goods, including prescription drugs and food.

Commenting for The Mail on Sunday, he admitted there is a need for “urgent reform of an unfair and outdated system” that leaves traditional retailers at a disadvantage against online operators with lower overheads. But he added: “You can’t tax people to go back to the stores.”

The Treasury has launched a long-awaited consultation on an online sales tax as a way to rebalance the load between the internet and brick-and-mortar retailers.

Steve Rowe: M&S boss doesn’t think now is the right time for an online sales tax

Supporters argue that it would be an easy way to fix the unfair advantage enjoyed by online businesses that have driven shoppers away from the high street.

Rowe’s barrage is likely to be one of his last public statements as head of Marks & Spencer. This week he will present his final results for the entire year to the City and will leave office shortly.

The intervention at this stage of his tenure reflects the depth of feeling within Britain’s largest clothing chain.

Many retailers have been taken aback by the government’s lack of meaningful action on high street problems.

Rowe’s views will pit him against supermarket bosses who have voiced support for an online tax.

Supermarket bosses argue it will help level the playing field with online rivals like Amazon, which have long feared it would launch a full-scale assault on the food market.

Sainsbury’s and Tesco have publicly supported an online sales tax, arguing for a proportional cut in merchant rates.

Rowe said: ‘Now, more than ever, we cannot ignore the potential impact on hard-pressed consumers who are already swallowing a sales tax through VAT.

“If an online sales tax is applied in its broadest sense, consumers will pay an additional tax even on essential items such as prescription drugs, baby items and staple foods.”

The veteran retailer said the move would hit less well-off shoppers harder than those with higher incomes. “At any time this would be regressive, but introducing this at this time would be morally bankrupt,” he said.

‘The simple fact is you can’t tax people to go back to stores. You need to invest and adapt.’

Rowe warned that an online tax alongside VAT and merchant fees would also impose “a triple tax lock on the future growth” of brick-and-mortar retailers.

Trade fees are hated by many store managers and are often cited as a major cause of mass store vacancies.

Rowe also complained about increases in National Insurance contributions. An additional tax burden on the sector may mean squeezed store managers feel compelled to cut staff numbers and downsize stores. He said stores in struggling city centers would be particularly vulnerable.

“They can cut their fabric accordingly, starting with the least profitable parts of their business,” he said. ‘Sadly, more often than not it will be high street shops, particularly in city centers already clamoring for investment and jobs.

‘It’s wrong to pit online and bricks and mortar against each other. Our future requires a mix of digital services with physical retail so customers can shop how and when they want.

‘When we get this right, stores can be a real source of competitive advantage, offering a modern, inspiring and convenient shopping experience.

“It’s the job of retailers to innovate and invest to get customers back through the doors, and it’s the job of government to ensure a level playing field and make sure the regulatory environment doesn’t make it harder.”

Rowe said the Treasury must act to free up the sector and allow it to “compete globally” rather than hand the market over “to US and Chinese players and stunt one of the few innovative and growing segments of the UK economy”.

The longtime M&S employee noted that more than three million workers are employed by the sector. He called for a cut in business rates financed by the Organization for Economic Co-operation and Development’s planned global minimum corporate tax rate of 15 percent for online giants.

Rowe said: “This will ensure that ‘free’ multinationals, many of them tech companies, pay their fair share.”