Belfast Telegraph

Sunday 21 December 2014

Tesco's job threat over plan for tax hike

Corporation slams levy idea taxing big firms to help out small business

Sammy Wilson felt the wrath of Northern Ireland's second biggest employer yesterday, which threatened to cut its planned job creation and investment here if a proposed levy on large retailers comes into force.

Tesco's Corporate Affairs Director David North, on his way to a meeting with the finance minister at Stormont, said the company plans to put £100m into the local economy and create 1,500 jobs here over the next three years.

But those plans will be cut if Mr Wilson's proposals - to increase rates for large retailers and redistribute them to small businesses - are given the go ahead.

"(The new jobs) are genuinely put at risk if the administration goes through with this," he told the Belfast Telegraph. "A substantial proportion of our investment will be cut."

Mr North said Tesco, which employs 9,000 people here, had previously been impressed by Sammy Wilson and First Minister Peter Robinson's eagerness to attract inward investment but were "surprised, disappointed and shocked" at the large retailer levy proposal.

"There is a belief that this tax will raise revenue without any disadvantages to the economy, but it will deter investment into Northern Ireland," Mr North said.

"We operate internationally - I think that's why the administration think it's a good idea to introduce this levy - but where capital is constrained, investment is going to go where we have more confidence in the return. There are plenty of administrations across Europe trying to attract investment and over time it is not going to flow to those areas which are saying we're going to tax you until you squeal."

He said that under the proposals, 18 of the large Tesco stores will each face a bill of between £100,000 to £200,000 per year, a figure which equates to a 15% hike in the company's business rate costs. And he said the levy would also be a tax on town centres where half of the larger Tesco stores are located.

Mr North said the mixed signals the supermarket was getting from the Executive were confusing.

"It's fine to talk about a cutting corporation tax in the future but in the same breath you're talking about a levy that is going to happen now. It's a very conflicting signal."

And while he said investment would be cut in the future, he wouldn't put a figure on the exact number.

"We're going to have to do the sums depending on what the final proposals look like. Any responsible business will have to do the same."

Tesco joins the other large retailers which have expressed their disapproval of the proposed tax. Sainsbury's boss Justin King was in Belfast last week and also said the supermarket's future investment in Northern Ireland could be impacted by the introduction of the tax.

Meanwhile, B-amp;Q urged the Executive to take on board proposals by the Scottish Executive, which targets only those large retailers selling alcohol and tobacco.

The organisation representing independent retailers in Northern Ireland wasn't impressed with Tesco's assertion that its future investment here could be in jeopardy.

"For Tesco to make this threat simply beggars belief," spokesperson for the Northern Ireland Independent Retail Trade Association (NIIRTA) Glyn Roberts said.

"Their out-of-town stores, which enjoy an unfair competitive advantage, pay less per square foot in rates than small town centre stores and furthermore don't pay rates on their free car parks.

"This is about a level playing field in relation to rates for both small and large retailers," he said.

Mr Wilson was not available for comment but when launching the consultation on raising the amount of rate relief for small businesses in June he was adamant that the likes of the supermarkets should pay up.

"I think it is right that additional small businesses get help and that this should be funded by asking the largest retailers to pay more," he said.

"The Executive wants to create the right conditions for a sustained economic recovery. The proposals in the consultation paper are about co-existence in the market place, not favouring small over large businesses.

'He must not yield to these bully boy tactics'

It's no understatement to say the retail sector is under threat due to the global recession. It is, however, an overstatement to accuse the finance minister of ruining Belfast's chances of becoming one of the UK's top 10 retail destinations.

No one would deny that we all want to see Northern Ireland's town centres and high streets up there competing with their counterparts in GB, but it's not possible without government intervention.

The minister has been keen to stress that it's difficult to work out who should benefit from the scheme, so it poses a dichotomy: should he allow other types of small businesses in Northern Ireland to benefit from the introduction of the Large Retail Levy?

What the Northern Ireland Retail Consortium must realise is that our town and city centres comprise not just small independent shops and retailers, but other outlets and services key to the success, or failure, of any services culture.

It is all too easy to throw the book at the minister, but it's also difficult to ignore the fact that it's the large retailers who can well afford to pick up the tab.

Some claim a large retail levy could impact on investment plans.

However, what we do not want - and what the minister must not yield to - is pressure from bully boys threatening to pull the plug.

On balance, NI needs a good mix of retailers and that will only be achieved through dialogue with a view to working out who can best afford to pay the price of retaining retail operations.

Don't throw your toys out of the pram just yet!

Donald C McFetridge, Retail Analyst at the Ulster Business School, University of Ulster

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