Bosses at Sainsbury’s have urged the Government to launch an online sales tax after rival M&S warned that such a measure could damage the high street.

The contrasting calls come a day before the Government is due to close a three-month consultation on whether to introduce an online sales tax.

Such a tax has been proposed as a potential measure to fund a reduction in business rates, the property tax facing shops, pubs and restaurants.

Sainsbury’s has said the current business rates system is damning for UK high streets and called for the Treasury to fix this using cash from an online sales tax.

Kevin O’Byrne, chief financial officer for the supermarket group, said: “High business rates on shops is destroying high streets up and down the country.

“We urgently need fundamental business rates reform.

“We urge the Government to introduce an online sales tax that funds a reduction in business rates for retailers of all sizes, and levels the playing field between physical and online retailers.”

Sainsbury’s is among major retailers, including Tesco and Morrisons, which recently joined the Cut The Shops Tax campaign to demand an overhaul of business rates.

Chancellor Rishi Sunak promised the consultation over an online tax at the Budget in October following businesses’ concerns of a potential tax imbalance between in-store retailers and those online.

However, in a letter to the Chancellor, M&S chief financial officer Eoin Tonge said: “Introducing an additional tax on retail, already overburdened, will simply mean retailers cut their cloth accordingly.”

Online sales are currently the main area of growth for many retail businesses, which have raised concerns that a new tax would hamper their recovery amid rocketing digital demand following the pandemic.

Mr Tonge added: “Far from levelling up, an online sales tax would lock us down.

“It would make it even harder for the retailers the consultation is purportedly trying to help to invest in the digital transformation required to survive and grow in the modern, digital era.

“The solution we need is practical, pragmatic reform of business rates and better taxing of global players to ensure everyone pays their fair share.”