BUSINESS leaders have dismissed plans for an extra tax on online and out-of-town retailers, insisting it would undermine transparency and fairness.

The Scottish Retail Consortium branded the proposal “ill-considered and poorly timed” and argued it would do nothing to help struggling town centres.

It comes after Chancellor Philip Hammond hinted at tax changes to put high street stores on a level playing field with discount online retailers.

The Scottish Government is already considering similar plans following a recommendation in last year’s review of business rates, chaired by former RBS boss Ken Barclay.

As part of this, three pilot schemes allowing councils to implement a business rate surcharge on "out-of-town ratepayers or predominantly online ratepayers" could be brought in from spring 2020.

But SRC director David Lonsdale said imposing any new tax would be an “unnecessary distraction”.

He said: “We have long argued the rates system is already too complicated and too expensive. Adding an additional tax, on what at this stage appear arbitrary geographical considerations, will do nothing to help struggling town centres.

“Instead, the Government need to look strategically at both high streets and the retail industry to understand what the right mix is for different communities.”

Larger firms in Scotland already pay more tax than their English counterparts due to the Scottish Government’s controversial large business rates supplement.

The SRC called for a more flexible rates system and a “substantially lower tax burden”, giving businesses the confidence to invest in new and refurbished premises.

In its submission to the Scottish Government’s Barclay implementation consultation, it said it had “profound concerns” over plans to allow councils to tax online and out-of-town businesses more.

It said attempts to introduce an extra tax would add “further complexity” to the system, while “undermining transparency and perceptions of fairness”.

Any new tax would also make it more expensive for retailers to operate in Scotland, the SRC said, hindering their ability to compete with other parts of the UK.

The trade association said it was unclear which businesses would be covered by the levy and how it would work in practice.

Around 17 per cent of retail sales are online, while eight out of the top 10 online retailers also have physical shops.

If a new tax is brought in, the SRC argued it should be used to fund reductions in business rates, rather than just “siphoned off for general council spending”.

It also called for safeguards including a cap on the levy to ensure it is not punitive.

The body said local authorities should focus on using their existing powers to cut business rates on a discretionary basis.

Murdo Fraser, Scottish Conservative shadow finance secretary, insisted firms would be better placed if they were not at a "competitive disadvantage to others in the UK".

He said: “Scottish retailers, in and out of towns, have been struggling for some time and are in urgent need of support.

“The SNP must answer the concerns raised by the SRC regarding the out of town levy to ensure that no business is unfairly burdened.”

A Scottish Government spokesman said: “We are taking forward the recommendations of the Barclay Review aimed at supporting economic growth and increasing the fairness of the business rates system.

“As part of the consultation we launched in June, we are now seeking views on allowing up to three local councils to introduce pilot schemes in which businesses based predominantly online or out-of-town might be charged a modest business rates supplement.

“The proceeds from this supplement would be used to support rates relief for businesses in town centres and we are consulting on a range of appropriate safeguards, such as the need for consultation with all rate-payers who might potentially be affected.

“It is important that the consultation is as wide-ranging as possible and we would encourage all those with concerns or comments about the current business rates system to take part.”