Chancellor considers online sales tax for e-commerce retail sector

The Chancellor, Rishi Sunak, is considering the introduction of a new sales tax for the online retail sector in a bid to help the struggling high street compete with the e-commerce sector.

The Treasury published a call for evidence last week, seeking industry views on an online sales tax for e-commerce retailers as it looks for ways to help bricks and mortar stores compete.

The tax would run alongside business rates, and the consultation document has stated that it could ‘provide a sustainable and meaningful revenue source’ for the Government.

The Government has also stated that the tax could be imposed on revenues that businesses generate from online sales to UK consumers, as it aims to focus the tax on sales that are in direct competition to sales in physical stores.

With non-essential stores closed during the COVID-19 lockdown in the UK, online sales increased significantly, with the industry-wide move to online shopping being accelerated and the problems faced by the high street being exacerbated by the pandemic.

Official figures state that the total amount spent in the UK on online shopping was 53.6 per cent higher in June than it was in February.

The Government is considering two different approaches to the tax;

  • A two per cent levy on goods sold online; or
  • A charge on deliveries

It is believed that a two per cent tax would generate around £2 billion per year, while the charge on deliveries would aim to cut emissions, but experts have expressed concerns that the measures could result in an increase in prices for consumers.

The Government is also looking for opinions on a replacement for the business rates system, exploring the potential introduction of a capital values tax to shift the burden from tenants to landlords.

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