Derby's city council wants to tax larger supermarkets in an attempt to flow consumer spending back to the community, but the government fears this will result in price hikes.
500 million euro in taxes
Nineteen other local authorities have backed Derby's question, also in an attempt to get expenditures flowing back to the cities and communities. Right now, they feel that most of that money disappears from the local community. Said tax would bring in some 400 million pounds (500 million euro), according to the BBC.
"Research has shown that 95% of all the money spent in any large supermarket leaves the local economy for good, compared to just 50% from local independent retailers; this levy is a modest attempt to ensure more of that money re-circulates within and continues to contribute to local jobs and local trade," the report states.
Sustainable Communities Act
The proposal is part of the Sustainable Communities Act, which allows local governments and communities to propose solutions to local problems. Only supermarkets that are worth more than 500,000 pounds (630,000 euro) would be subjected to the levy, up to 8.5 %. Both Scotland and Northern Ireland have similar 'Tesco Tax' systems.
The government has to react to the proposal within 6 months. If they agree, then the tax will not only be implemented in the 20 cities and communities that have backed the proposal, but it will be implemented for every local government. If that were the case, supermarkets could lose up to 190 million pounds (240 million euro). If other retailers are also impacted, then the cost could be 400 million pounds (505 million euro).
The government has already indicated it is not a fan of the tax, as it fears price hikes will follow and it had previously said it does not want price hikes that will mainly hit families with a low income.