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Retailers warn against an online sales tax

Lauretta Roberts
28 July 2020

Retailers have warned that an online sales tax would lead to higher prices for consumers and place more stress on an over-taxed sector after it emerged Chancellor Rishi Sunak was considering implementing such a measure to shore up the high street and generate tax revenues for the Government.

The Government is exploring the idea of a tax that, according to some reports, might take the form of 2% on every online order or a delivery levy to curb traffic and pollution. The Government made a call for evidence last week, a process which will continue until Spring 2021, after which it will make its decision.

However the British Retail Consortium (BRC) director of business and regulation Tom Ironside, told The Guardian: “Taxing the sale or delivery of online goods would simply be another burden on an already overtaxed industry, one that would ultimately hit consumer spending through higher prices.

“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.”

However not all retailers are opposed to the idea of a so-called "Amazon tax" with Tesco chief Dave Lewis one of the most high profile supporters. He has suggested it is a method that could be used to raise tax for the Government and allow for business rates to be cut for all bricks and mortar retailers.

Prior to the crisis around 80% of retail sales were made in physical stores but this has dropped to 70% as consumers of all ages have come to rely on online shopping. For many smaller retailers, the ability to sell online has been a lifeline during lockdown and the immediate aftermath and many have ramped up their capabilities in this area.

It is not clear that the Government would use revenues from an online tax to offset a reduction in business rates. Last week it was revealed that the next valuation of the property tax, which determines how much in rates a business pays, would not take place until 2023. Retailers argue that property prices have slumped since the last valuation in 2015 meaning they will be forced to pay inflated rates for three more years.

Frasers Group said the news would force it to re-evaluate the viability of some stores in in its estate.

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