Commentary

Tech Tax Is A Future Stopgap, Publishers And Stores Need Help Now

It is hard to disagree with the sentiments expressed in today's Mediatel, which likens the Chancellor's 2% Digital Services Tax as going into battle against the tech giants with a wooden sword.

Although the move can be supported as at least a politician finally doing something, it doesn't deal with the big issues facing publishing and retail right here and now.

Regular readers will know this column regularly takes aim at tech giants who siphon off money, legally, to lower tax jurisdictions as well as the online-only ecommerce stores that operate in bases where they are freed from the massive business rates endured by stores on the high street. 

If you are a high street business and you're paying UK tax in full, including business rates, and yet you are competing with competitors who cannot say they are ticking both of those boxes, then it's hardly fair, is it?

It's the same for newspapers, particularly at the local level. How on earth can they compete when paying their UK tax in full against a backdrop of Google and Facebook accounting for more than half of all UK digital display advertising, yet paying incredibly low levels of tax?

The problem is that these British companies aren't surviving -- they are barely able to keep the lights on.

Local newspapers are in a process of decimation, or being "disembowelled" as Mediatel puts it, with daily news of papers ceasing to publish -- or at best, rivals being rolled into one publication. As The Express newsroom in in the process of finding out, these mergers between titles and companies usually result in multiple redundancies.

One need not look far to see the suffering on the high street. House of Fraser is under new management with multiple stores closing down, and the same is about to happen to Debenhams, where 50 stores are rumoured to be for the chop, at a cost of an estimated 4,000 jobs.

These everyday high street brands are in the last chance saloon as online sales from rivals eat in revenue, while costs just keep stacking up.

Therein lies the problem with the budget. The Digital Services Tax is well intentioned -- that is doubtless. But it's subject to even more consultation, after years of discussion already leading us nowhere.

The earliest it could come in is spring 2019 -- and even then, there is more international discussion expected, which could see the UK falling into line and holding back further to introduce a tax at the same time as other territories.

Cutting business rates by up to a third for two years will obviously also be welcomed by high street stores -- but again, this is going to kick in next year. It was needed at least a couple of years ago. 

The EU once put a value on the amount of tax the tech giants would pay if they were accounting for all their revenue in the EU. Instead of an average tax rate of 25%, the tech giants are paying 9%, and that means a disparity of between €50bn to €70bn a year. 

So raising around GBP400m a year through a 2% Digital Services Tax is a start, but it's only a start.

Saving the high street brands with a break on business rates should have happened years ago but, far more importantly, the ridiculous situation where the tech giants can legally avoid tax and pay instead through some low tax regime just has to be ended. 

The tax on the tech giants and the cut to business rates are good ideas. But we will see in the New Year once Christmas figures are in which of the well-known retail brands are in the headlines for having to accelerate store closure programmes or even go out of business -- just a few months ahead of a tax break that should have happened several years ago.

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