THE chief executive of one of the biggest German retail groups Rishi Sunak faces anger from retailers, and mass protests, after his plan to eliminate tax on shopping.
Sunak, who is head of Conseil Bérénice, a Luxembourg-based public fund that’s investing money in banks, firms and infrastructure across Europe, would save 2.2 billion euros (£1.2 billion) a year by removing the cost of stamp duty on items purchased from supermarkets and large shops.
Luxembourg-based Conseil Bérénice has 830 million euros under management. In the years since that was introduced in 1992, the total expenditure on stamp duty from Irish to Luxembourg – due to real estate, rental, postage costs, and processing of VAT – has been reduced by $24 billion (£21 billion).
Tax campaigners argue that by charging for shopping, supermarkets and high street stores effectively charge a premium for the privilege of shoppers using their supermarket checkout while still taking advantage of the low costs of other items on offer.
The effect for millions of people has been low prices and, thus, a tax cut.
But business leaders say that such “tax surrender” by retailers makes them lazy, lowers profitability and risks damaging European jobs.
German retailers have said the tax is killing more jobs, while French retailers have warned that the same may be true for such cash-strapped banks as Industrial Credit Bank of France, among other European institutions.
Germany currently has the most shopper-friendly tax regime in Europe, but a raft of EU reforms are planned to introduce what will be a tax on shopping. Those include a levy on everyday goods such as coffee makers, washing machines and toothbrushes.
The measures, which could cost about 1.1 billion euros a year, are intended to raise tax revenue in Europe’s poorest countries by incentivising them to invest more in industrial or health facilities.
Some European firms have argued that the limits should be lifted, as are the proposals for an across-the-board tax hike on retailers. However, these reforms still are not enough to fund the investments currently being made by many of the poor nations, meaning that it would be difficult for the funds to generate enough revenue for their benefit.
A French law obliges public and private institutions to hold an equal proportion of their assets in less tax-intensive and run-of-the-mill assets, such as property and machinery, and millions of jobs in retail stores could be threatened if other parts of the tax treatment are scrapped.
The supermarkets have also called on the European Commission to keep the existing rules in place in order to avoid mass protests. Sunak announced his plans to save money in an email to the mayor of Luxembourg’s third-largest city, Parlys.
Sunak said that they support the growing burden imposed on consumers, most recently by higher fuel prices. But he added that “investing in the poorest places allows to live better, and therefore more productive, than in the most developed countries”.
“I am aware that people may protest against our proposals”, he wrote. “But we need this protection for our workers in tough times.”