Tuesday, 29 May 2018

This year's stupidest policy proposal (in a crowded market)

It's annoying enough when a conservative policy response is to call for a new tax, even more annoying when it's as stupid as this one:
THE Chancellor is being urged to slap a 3 per cent sales tax on internet giants to help Britain’s ailing high streets.

Influential Tories are calling on Philip Hammond to fast-track a tax on the likes of Amazon, eBay and Google to “level the playing field” with UK business.

Tory rising star Neil O’Brien MP claims the move could raise as much as £500million a year. He told The Sun this money could be used to slash sky-high business rates blamed for pushing shops to the wall.
Let's get something clear here. What these 'influential Tories' are proposing is a tax that will make things we buy more expensive so we can reduce a tax on retail landlords:
In the medium to longer term, changes in rates paid appear to be reflected in corresponding adjustments in rental values. This relationship appears to be stronger for the retail sector than the office sector. However, there appears to be a significant relationship between the centrally set uniform business rate multiplier and rental values for the office sector.
Whether we should have a better way of taxing retail landlords is a different question to whether we should make consumers pay more for goods so we can reduce the apparent tax on retailers (and business in general). And that is exactly what the proposal from these 'influential Tories' will do - Amazon and eBay aren't going to absorb the new tax, it'll go straight on the cost of goods. Worse still, all those independent retailers who rely, in part, on sales through eBay, Amazon or Etzy will be the ones who take the biggest hit.

The high street is not struggling because of business rates, it's struggling because consumers have decided they rather like being able to order on-line and have it delivered to the door or the post office in the village. All dropping business rates would achieve is a delay in this decline - at the cost of higher inflation, consumer spending shifted from buying goods and services to paying a tax, and a sharp brake applied to one of the fastest growing parts of our economy. Stupid or what?



Curmudgeon said...

Yes, as I said on Twitter, the move to online retail is as much about convenience as about price. Likewise, while price is a factor, there are many other reasons behind the move from on-trade to off-trade alcohol consumption.

Anonymous said...

Same old, same old - treat the symptoms rather than understanding the root-cause.
Stop interfering, let the market-place find its level, that's conservatism.