Chancellor Looks At Taxing Internet Shopping

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May 24th 2022
Tax Week 7
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Chancellor Looks At Taxing Internet Shopping

Unexpected move to rein in the destruction of the UK High Street possible.

Online sales now account for near 30 percent of all purchases made by people in the UK, with an upward rising trend. Pre-pandemic, online sales made up a fifth of all purchases.

The Chancellor Rishi Sunak and his team are now drawing up consultation plans for a 'digital retail tax' to help even the playing field between traditional bricks and mortar shops and online businesses.

Making the planning rounds is a two percent sales tax to be applied when people checkout their baskets online, and paid directly to the exchequer - much like VAT. Another option being considered is to tax all deliveries made to online buyers.

The pandemic has brought about huge job losses, administrations and bankruptcies on the high street, a high street particularly hit due to the lock-down restrictions removing all but essential footfall.

At the moment the key difference between a business solely trading online and one that has a retail premises is the need for the physical seller to pay business rates. There have been large giveaways on business rates during the virus relief measures but these have not been enough for retailers who still have leases etc to pay.

Just last year a Treasury Committee argued that business rates needed to be overhauled to level competition advantages for online sellers.

Whilst the British Retail Consortium welcomes moves to help traditional retailers, it warns against any move to apply a sales tax - stating that it would hinder those traditional retailers who are surviving by creating online channels for sales.

Any 'digital retail tax' would likely be brought in under the banner of the digital services tax, a 2 percent tax on the revenues of companies like Amazon, Google and Facebook. These are companies that produce profits from UK users but through clever accounting they vastly reduce the amount of tax they pay, if any.

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