Reform tax law says Kingfisher

The UK government must reform the tax system to level the playing field between online retailers and traditional bricks and mortar operators or store closures will follow, Kingfisher CEO Ian Cheshire, has warned, reports Harris & Co accountants Northampton.

Cheshire who also heads the British Retail Consortium (BRC), said he would shut around a quarter of his company"s stores if they were not subject to long leases and other complications that would make closures prohibitively expensive.

He told the Daily Express: ‘The government needs to tax economic activity without having unintended consequences, such as high street closures.

‘We have a Victorian tax system in which people and space are taxed but digital sales are not. If I sell online my tax is minute.

‘The balance between online and offline is skewed. If you are not careful there will be a lot of new activity not generating tax.’

Wearing his BRC hat, he has also urged chief secretary to the Treasury, Danny Alexander, to freeze rates in the Budget on 20 March.

The BRC has warned that business rates are set to rocket by another 2.6% in April, after a 5% rise in 2011. He said business rates are equivalent to forking out an extra 45% on the annual rent of a property.

Currently, business rates are based on floor space which means physical shops on the high street have to pay bigger tax bills, while their online rivals might typically only pay for a warehouse.

The B&Q boss said this was one of the main reasons that so many shops were closing and jobs being axed.

And partly because of this, online retailers could use the advantage of lower costs to undercut their high street competitors, who also have pay higher energy and staffing costs.

Cheshire said: ‘As the proportion of internet sales grow, the amount of tax raised by business rates will fall if they continue to apply only to a shrinking base of physical stores. It is unsustainable.’

His comments were made amid the ongoing debate over tax loopholes used by internet giants such as Google and Amazon. It also follows in the wake of a Mail on Sundayreport which referenced tax figures from annual reports and showed that almost one in four of the UK’s biggest listed companies paid no corporation tax (CT) in the UK last year.

Its analysis of the latest annual reports and accounts of all the companies in the FTSE 100 showed that nearly half – 47 companies - gave ‘no obvious figures’ for CT paid in Britain.

Of the 53 that provided details for CT paid in the UK, 12 showed that they paid no CT and six of these companies received a tax credit.

Among the dozen businesses with no CT bill in the UK last year were British American Tobacco, Experian, G4S, IMI, Rolls-Royce, RSA Insurance, Smiths Group, Tate & Lyle, Vodafone and Vedanta. However, they paid £5.6bn in corporation taxes abroad.

The Treasury said it was ‘committed’ to backing the British high street.