Richard Walker, managing director of the frozen retailer, called for the tax on online sales as part of an overhaul of “outdated and Victorian” business rates.

The call comes after Iceland faced criticism over its decision to keep hold of business rates relief for the past financial year despite continuing to trade as an essential retailer through lockdown periods.

At the onset of the pandemic, the Chancellor announced a business rates holiday for retailers for the year but more than £2bn in relief was handed back by essential retailers who saw higher customer demand.

Mr Walker told the PA news agency the company was right to take the relief at the time but was not taking extended tax relief announced by the Government in February.

“We absolutely believe that we have come to the right decision” he said. “You look at some of the companies who paid it back, like Asda and Sainsbury’s – they then announced thousands of job cuts after.

“Having that relief meant we could preserve jobs, that’s what it was given to the sector to do. And actually, we’ve since been able to create jobs.

“So now, we felt that further support wasn’t needed so won’t take the extension.”

The retail boss was highly critical of the current business rates regime which will restart, with discounts for some high street businesses, from the start of July.

He said: “I think we need a digital sales tax and I say that with a business with a really strong online business.

“You need to completely change business rates as they are, but there also has to be some form of rebalancing with online because otherwise we will be killing off the high street as it is.”

Iceland has delivered strong growth over the past year after rapidly expanding its online delivery business.