Editor | 3 August 2020
What an online sales tax means for digital retailers

What an online sales tax means for digital retailers

Rishi Sunak is reportedly weighing up a new tax on goods sold over the internet as the Chancellor considers options to save the high street post-lockdown. But what would this mean for online sellers?

The plans could include a 2% levy on all online sales, which would raise £2bn per year for the exchequer, or an additional charge on deliveries.

The online sales tax is being considered as part of broader plans to support ‘bricks and mortar’ retailers in the aftermath of the coronavirus pandemic, particularly on business rates.

A Downing Street spokesperson said that the government would “look into all aspects of the business rates system and as part of this we will consider the case for introducing alternative taxes as part of the review, including an online sales tax.”

In a supplementary 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.”

Despite an easing of lockdown restrictions in the UK, footfall in major UK towns, cities and shopping centres is still significantly lower than it would usually be at this time of year. For high street retailers, many of which were already struggling, coronavirus could be the final nail in the coffin.

At the same time, online retailers have thrived as more people turn to the internet to purchase ‘non-essential’ goods.

Tesco’s chief executive Dave Lewis has recently called for a so-called ‘Amazon Tax’ to prevent more high street shops from closing.

It is thought that a 2% tax on online sales would raise enough money to cut business rates by 20% for all retailers.

However, the British Retail Consortium (BRC) - whose members include online firms as well as traditional high street retailers - has expressed concern that the tax would ultimately hurt consumers through higher prices.

Tom Ironside, director of business and regulation at the BRC, said: “Throughout the pandemic, many of us have been relying on retailers to ramp up their online services to ensure we can all get the goods we need. The government should not harm these efforts by further taxing the businesses providing these services, and the people they serve.”

Miles Grady, director of CloudAccountant.co.uk said: “An additional 2% tax on online retailers would almost certainly hurt some sellers more than others. It’s easy to scapegoat online retailers when high street shops close down, but many online sellers have been stung by the coronavirus pandemic too.”

CloudAccountant.co.uk specialises in supplying cloud-based accountancy software packages such as FreeAgent and Xero to online retailers. For more information, speak to a member of the team today. Call: 0808 281 0303.