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Chancellor Rishi Sunak Considering 2% Online Sales Tax

Posted 2 years ago

Chancellor Rishi Sunak Considering 2% Online Sales Tax
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According to the Times, the Treasury is considering whether to introduce a 2% tax on goods that are sold online in an attempt to give High Street shops an advantage over large-scale retail. If introduced, it is believed the levy could raise around £2bn a year.  

The rumours emerge as Rishi Sunak expressed concern that current business rates essentially penalise high street stores while giving an unfair advantage to online retailers. The Commons Treasury Select Committee has already called on the government to consider an online sales tax to allow for a “more level playing field” within the retail sector. 

The suggestions come amidst a wider review into business rates, which the Government launched as a consultation earlier in July. The Treasury said it was exploring the potential strengths and weaknesses of alternative property and online taxes put forward as possible replacements for rates.

In a recent consultation document, the Treasury said: “Some commentators argue that the business rates system creates a distortion within the retail sector, favouring online retailers that can operate without the high-value properties that are a feature of more traditional retail.

"This has led to proposals that the government should levy a tax on companies based on their online sales, and that this could be used to fund business rates reductions for retail properties."

However, according to the Taxpayer’s Alliance, the 2% tax could cost households. In a recent study, it claimed that the levy could cost the average household more than £1 a week, with a typical household paying an extra 56% per year.  

Commenting on the news, CEO of Nextfin, Sacha Bright, said: “The pandemic has struck at a time when local shops are struggling against the immense competition posed by online stores with lower fixed costs.  

“The implementation of some sort of online tax is something that I personally have been campaigning for a number of years. The current system of business rates is frankly a draconian measure, disproportionately affecting small enterprises, and contributing to the demise of the high street. 

“There should be a tax to replace business rates on large monopolising online retailers such as Amazon. This tax would level the playing field for smaller online retailers, and would have little to no impact on the consumer.  

“The bottom line of this is that the government has to date spent over £10bn in providing over 879,000 businesses with grants during the pandemic. This is, in essence, tantamount to ending business rates. While, arguably, these funds have been spent on offices, the government has given grants to the likes of Tesco, Sainsbury’s and other large supermarket chains, many of whom have not been as severely impacted by the pandemic.  

“I believe that instituting an online tax as high as 5% would still be feasible, and enable the government to raise around £6bn per year. This could replace business rates and help to revive our high street.”

Author: Sacha Bright & Oliver Murphy


To the best of our knowledge, the information we have provided is correct at the time of publishing. Sacha Bright is not a solicitor or accountant and we recommend that you seek professional advice on any topic discussed. Nextfin is not liable for any damages arising from the use of or inability to use this site or any material contained in it, or from any action taken as a result of using the site. 

Tagged: sme chancellor finance alternative finance news coronavirus

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