Local Authorities calls for 'Tesco Tax' on large Supermarkets for Community Investment ñ British Retail Consortium slam idea

Local Authorities have called for the Government to sanction plans enabling them to place a levy on supermarket giants.

The proposal suggests that large retailers holding a rateable value of over £500, 000 should be slapped with an added 8.5% business tax.

Derby city council, one of the key figures behind the proposal, bemoaned the 95% of cash raked in by large supermarkets which never gets pumped back into the local economy. The scale of this problem, the council suggests, is highlighted when contrasted with the 50% of money taken by local retailers, which is redistributed locally. 

Made under the conditions of the Sustainable Communities Act, which enables communities and councils to offer answers to micro-economic problems affecting localities, local authorities are confident that the terms of the proposal will re-distribute money amongst the local community.

A consortium of 20 local councils have given their endorsement to the colloquially described ìTesco Taxî, all firmly committed to the increase of revenues within local communities. Derby city council leader, Ranjit Banwait, slammed current conditions, stating his locality was enduring the ìworst cuts in historyî, noting parks as an area which specifically require improvement.

There is precedent to reinforce the credibility of the council's proposal, as similar levies have been imposed in Scotland and Northern Ireland. However, the business tax was all but dismissed by the Department for Communities and Local Government (DCLG) who said the idea had already been discussed and rejected in the past, suggesting their ìare much better ways to support small shopsî.

The previous proposal came from former Iceland CEO, Bill Grimsey, who recommended a tax on all major retail chains to fund small businesses. He stresses that the tax should focus on aiding straggling small retailers, rather than covering the financial deficiencies of local authorities. 

"If it's used simply to plug council budget shortfalls, it won't be fair and it'll be anti-business. This has to be about the high street, not clobbering big business,î Grimsey stated.

This viewpoint was echoed and elaborated on by the British Retail Consortium amongst other critics.

Some of the UKís top business figures have slammed the prospective ìTesco Taxî, stating it will cause prices to spiral upwards whilst not addressing the problem at hand; that of the stale system of business rates currently inhibiting societal development.

John Rogers, chief financial officer of Sainsbury's, said: ìHigh street retailers already contribute disproportionately to funding local services."

"Any further increase in business rates paid by supermarkets would inevitably contribute to higher food prices for consumers. Instead of looking to increase the tax burden we should work to reform the rates system to ensure a fair tax system for retailers and councils alike."

According to the British Retail Consortium (BRC), companies whose holdings are taxed under £12, 000 make up 64% of taxable firms, yet contribute a mere 6% of the amount taken in. However, Business Rates, which have increased exponentially for years, will be worth a projected £27bn by the end of 2014.

The DCLG stress that if the tax is imposed, ìlow income familiesî will suffer the most and call, once more, for rejection of the local authorityís proposal.

Local councils dub their scheme a ìmodest attemptî to recoup funds for community investment. However, Mr Allan, chairman of the Federation of Small Businesses said current rates already meant many small businesses are on the verge of collapse.

He surmised: ìWhat we currently have is a system that takes no account of ability to pay, or changes to economic conditions. The FSB wants to see a level playing field for all businesses, and that means starting from scratch.î

The general consensus, amongst the sources discussed, is that in an economic climate where small business investment is key to growth, local authority notions of community reinvestment via the proposed methods are fanciful and narrow-sighted.