The warning from Mr King, head of one of Britain’s biggest businesses, comes just a day after the Confederation of British Industry said the Government’s approach to tax left companies feeling “schizophrenic”.
The Coalition has made cutting corporation tax from 28pc to 20pc by 2015 one of the pillars of its economic strategy, reports The Telegraph.
However, Mr King said: “For every £1 we have benefited from the reduction in corporation tax we have incurred more than £2 of other taxes, in particular business rates and employers’ national insurance.”
Business rates are costing the retail industry more than £7bn a year and increased by an inflation-linked £175m in April.
Mr King said that business rates were giving high-street retailers a “higher burden” compared with online retailers with little property, such as Amazon.
“Clearly that is not a level playing field and the Government is going have to think hard about how it rebalances that tax take,” Mr King said. “There is a difference between bricks and mortar retailers who pay rates, National Insurance and all the other domestic taxes that are due, and online retailers who by virtue of their lack of physical presence in the high street don’t contribute in the same way.”
Mr King was speaking as Sainsbury’s said that underlying pre-tax profits rose 6pc to £756m in the year to March 16, slightly ahead of analyst expectations of £748m, with like-for-like sales up 1.8pc. The retailer also confirmed that it will take control of Sainsbury’s Bank by buying the 50pc held by its joint venture partner Lloyds Banking Group for £248m.
This is the eighth consecutive year of growth for Sainsbury’s under Mr King, who joined the company in 2004, and he dismissed City speculation that he is preparing to step down. Sainsbury’s sales, which are growing ahead of its major rivals, mean it is on course to overtake Asda and reclaim the position of Britain’s second biggest supermarket as early as this year.
However, despite the sales increase, Sainsbury’s recorded a decline in statutory pre-tax profits. This was because profits from the sale of property fell from £83m to £66m, and the retailer wrote down the value of its remaining property assets by £10m.
This meant that pre-tax profits fell 1.4pc to £788m on sales of £25.6bn, significantly below the £879m of profit generated by Wm Morrison, which is Britain’s fourth largest supermarket.
Shares in Sainsbury’s fell by 15½, or 4pc, to 381p following the results as analysts expressed disappointment at the company’s forecast that like-for-like sales will rise by between 1pc and 1.5pc over the next 12 months.
Philip Dorgan, analyst at Panmure Gordon, said: “The results are OK but guidance looks disappointing and the decision to buy out the bank – while sensible – adds risk over the transition period.”
Sainsbury’s will pay a dividend of 11.9p, up from 11.6p, on July 12.