Shopping Centers Today

DEC 2018

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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20 S C T / D E C E M B E R 2 0 1 8 T H E C O M M O N A R E A E U R O P E A s in the U.S., European land- lords and retailers have had some success lately in their quest for a fairer marketplace. In December 2017 the European Union had decided that online merchants outside the EU selling merchandise to customers inside the EU must collect and remit value-added tax for any goods costing less than €22 (about $25). This effectively closed a loophole that had been creating opportunities for fraud, observes Joost Koomen, ICSC Europe's head of public affairs. Indeed, some online sellers had simply been marking costlier goods at less than €22, Koomen says. EU policy makers say they hope to come up with a comprehensive set of cross-country VAT rules by 2022. ICSC observers are predicting, however, that lengthy negotiations among EU mem- ber states are still ahead before any unanimous agreement will be reached. A TAXING PROBLEM "We're cautiously optimistic about the ruling," said Koomen. "It's a step in the right direction, but we will wait and see what the practical outcome will be." Another development with a long- term impact is the EU Court of Justice ruling that retail is a service. That court order means that before local authorities can reject a developer's application to build a shopping center, they must first prove that the new cen- ter will have a negative impact on the region's existing stores.' Working out the rami"cations of that decision may take years, but for now Koomen says ICSC remains cau- tiously optimistic that it will remove obstacles for retail development. In the U.K., meanwhile, retailers continue to chafe at the rates system, by which property owners are charged a tax according to the value of their real estate, putting them at a disadvantage with online merchants. ""is is not a tax on revenue," said Jonathan Reynolds, deputy dean and director of graduate studies at the Oxford Institute of Retail Management, at Oxford's Saïd Business School. "Consequently, those enterpris- es with less property in less-expensive rental locations — like e-commerce warehouses on the edge of a free- way — will pay less tax in total than a multibranch business which trades from high-rental locations in city centers." "e Centre for Retail Research, a retail think tank, estimates that this coming year the rates brick-and-mor- tar retailers pay will amount to about 2.3 percent of sales, versus 0.6 percent for online retailers. ""e business-rates system is antediluvian," wrote ana- lysts at that research center recently. "Online retail is only paying 6 percent of the total business rates paid by re- tailers, and bricks-and-mortar retailers that employ more than 2.6 million people … face considerable hardship if they are to keep going, paying 94 percent." As a fairer alternative, brick-and- mortar retail advocate Bill Grimsey, a former supermarket CEO and a blogger, has proposed a 2 percent sales tax levied at the point of sale, which he estimates could raise the £8 billion (about $10.5 billion) the government now collects from its rates-based busi- ness taxation. Reynolds says he is skeptical about whether the government will be in any hurry to change the system. "From the government's point of view, the property tax is easier to measure and collect and di¦cult to avoid," said Reynolds. What is more likely, observes Reynolds, is an additional tax on the digital economy. Q Europe has a tax-fairness fight of its own going on By Bennett Voyles Polygone Riviera, Cagnes-sur-Mer, France

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