Report into retail levy a ‘kick in the teeth’ for Scottish Government

A report by the Centre for Economics and Business Research (CEBR) and commissioned by ASDA has established that the Scottish Government's planned retail levy will strip supermarkets of up to 10% of their profits and deter new stores opening and further jobs being created.

Scottish Conservative Finance Spokesman, Gavin Brown MSP said:

"This report is a kick in the teeth for the Scottish Government and highlights the fact that the retail levy is an 'economically irrational tool'. It is disappointing that the Scottish Government has failed to carry out their own impact assessment and that we have had to rely on others to do so.

"This report by independent economists makes it clear that the retail levy is likely to have a negative impact on our economy, could deter job creation and could seriously harm Scotland's retail sector. All of this comes at a time when the retail sector is already struggling.

"The SNP should be doing everything within its power to help Scotland's economy but instead it is trying to grab cash from a key sector."

CEBR report

In the absence of a BRIA report from the Scottish Government ASDA commissioned the Centre for Economics and Business Research to carry out an independent review of the Scottish Government's proposed Public Health Levy.

The key findings of the review were published on 11 January 2012 and are as follows:

"Retail is a low-margin industry, particularly for food retailers. Thus, although the Public Health Levy amounts to a relatively small share of retailer turnover, the levy is substantially higher as a share of business profits.For Scottish retail businesses, by 2014-15 the health levy will amount to 0.2% of Scottish retail turnover and 1.0% of Scottish retail profits.For Scottish non-specialised retailers predominantly selling food, alcohol or tobacco – such as supermarkets - the levy will amount to 0.4% of turnover and 7.0% of profits.For the estimated 240 stores liable for the levy, the levy will amount to 0.4% of turnover and 8.0%-10.0% of profits.The proposed health levy thus represents a substantial share of Scottish supermarket profits; this is likely to have a negative impact on the Scottish economy, deterring job creation and business investment in the retail sector."

"In Cebr's view, the proposed levy is an economically irrational tool for achieving this [the Scottish Government's] objective. Firstly, the levy only applies to large retailers who sell alcohol and tobacco, rather than all alcohol and tobacco vendors. Secondly, the levy is in the form of a business rates supplement and is thus not proportional to the amount of alcohol or tobacco sold by a retailer. Given this, the proposed health levy appears to be little more than an income generator for the Scottish Government, aimed at extracting more tax revenue from some 240 large retailers in Scotland. Furthermore, the levy comes at an extremely difficult time for Scottish retailers; the November 2011 SRC-KPMG Scottish Retail Sales Monitor showed the worst fall in retail sales since the survey began in 1999. An additional tax on retailers can only exacerbate what it already a tough economic environment."

"John Swinney, the Cabinet Secretary for Finance, Employment and Sustainable Growth, has partially justified the levy on the grounds that it amounts to "just 0.1% of retail turnover in Scotland." Yet, this is a rather simplistic interpretation of the size and implications of the levy, as it ignores the disparity between retailer turnover and retailer profit. Furthermore, it is unclear why one should focus on the impact on total retail turnover, rather than the impact on turnover among the 240 stores estimated to be subject to the levy."

Back to all posts