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HMV: We need to level the tax playing field for retailers, says Umunna

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‘Unfair competition’ posed by some multinational retailers’ tax arrangements is ‘totally unacceptable’, the shadow business secretary said today in response to the news that HMV had gone into administration.

Chukka Umunna told Sky News that a change in shopping habits had ‘undoubtedly’ had an impact on high street retailers: ‘We’ve got the third largest internet shopping market in the world, and if you don’t change and adapt to that you will fall into difficulty.’

Falling demand and a flat-lining economy had also contributed, he said. ‘I think we need a sector-specific industrial strategy for retail … There are things that can be done in the short term and the long term to support it.’

Asked what he would have done to save HMV, Umunna said he was not sure that his proposed measures would have saved the company. However, Labour was committed to a temporary reduction in VAT and, he added, ‘we’ve got to level the playing field here’.

‘Unfair competition’

‘It’s totally unacceptable that multinational online retailers – we all know who they are – who do not pay their fair share of tax are posing, therefore, unfair competition against those who do, like HMV and others.’

Business rates were another issue, he said. Labour had invited retailers to contribute to its policy review, but any commitment would be a tax and spending decision to be taken nearer to a general election.

Very few commentators appear so far to have linked HMV’s demise to corporation tax policy.

But Richard Murphy, director of Tax Research, claimed that ‘a lot [of HMV’s recent trouble] is down to bad tax policy’.

Writing on his blog, Murphy said: ‘Business cannot compete on an unlevel playing field. Tax can and does unlevel playing fields. The abusers win. We all lose. We’re seeing the price time and again.’

However, Allister Heath, editor of City AM, said ‘all of us’ were responsible. ‘Consumers are all-powerful, and shifting tastes and technologies mean that fewer of us had chosen to shop in these stores. We are the masters, and the capitalists our servants.’

Heath added: ‘There were also some cyclical factors: the economy is not doing well enough. But that wasn’t the real reason – and neither was the fact that some firms have a tax advantage over others. No, the recent spate of bankruptcies – unlike some earlier ones – was almost entirely caused by the accelerating technological revolution.’