Rishi Sunak is eyeing an online sales tax again as a way to make things fairer for high street retailers forced to pay much higher business rates compared to tech behemoths.
Treasury officials have their heads down at work on a new online sales tax, figuring out which goods and services would be covered, according to the Daily Telegraph.
The online sales tax might actually involve two new taxes: a levy on all goods bought online and a tax on consumer deliveries.
>See also: Small businesses may have to pay 2% online sales tax
However, nothing is going to be announced in this month’s Budget on October 27, as the Chancellor has already kicked reform of business rates into the long grass – again – saying he needs more time to untangle this knotty problem.
Any digital sales levy would be unveiled in the spring.
Online retailers thrived during the Covid-19 lockdowns with people unable to visit non-essential shops for three months.
Even with the easing of restrictions, footfall on the high street has been patchy, with many people still nervous about shopping in crowded retailers.
>See also: Government mulls extending 2% online sales tax to all small businesses
The idea of a digital sales levy was first mooted by Philip Hammond when he was Chancellor, and a previously suggested 2 per cent rate would generate around £2bn.
Business rates, which generated about £25bn a year for the Treasury before Covid, are a property tax linked to the underlying value of commercial premises. Present rates are based on property values dating back to 2015, which do not reflect a sharp decline in the value of high street shops and shopping centres after the rise of online shopping and the impact of Covid-19.
The tax bears no relation to the trading performance of a shop and penalises bricks-and-mortar outlets over online retailers.
Further reading
lots of small business don’t have a premises, as not viable, so small business must be exempt or they will mostly go out of business!
Any business with a turnover less that £1Million should be exempt regardless whether it has a shop or not. The simpler the rules the better. I would say it should be linked to how much VATable sales a business generates. So if your sales are exports, you don’t pay the additional tax.
So how are they to deal with retailers, who have both retail premises but also do mail order, will it be a proportion of the sales, and extra paperwork, or will the online sales have to be declared separately? another paperwork headache, on top of everything else that we could all do without.