Chancellor considers online sales tax to boost bricks-and-mortar

Online retailers have seen a boom in sales amid the coronavirus pandemic – in fact, they won a record share of shopper spending in May as consumers looked for more convenient and safer ways to shop while in lockdown. But while online sales provided some retailers with a route to market in the height of the pandemic, now that bricks-and-mortar shops are reopening there are worries that the high street is on the brink of collapse.

Concerns have long been mounting about business rates among speciality retailers, and according to a call for evidence published last week regarding the government’s business rates review, Chancellor Rishi Sunak is considering an online sales tax that could be used to fund business rates reductions for retail properties.

The report highlights the argument that the business rates system imposes an “unreasonable burden on retail, where property is a major business input” and favours online retailers, which can operate without high-value properties.

However, others fear that an online sales tax would simply increase the costs for consumers or make it more difficult for bricks-and-mortar retailers to establish and grow their online presence. A petition started by Kieran Fisher on Change.org has called for any potential online tax to exempt small and medium businesses.

The call for evidence suggests that levying a tax on companies based on their online sales could “provide a sustainable and meaningful revenue source for the government”.

The government announced in its Budget 2020 that it would review the business rates system in order to “reduce the overall burden on businesses” and create a more sustainable system. It has since confirmed that the 2021 revaluation would be postponed in order to help reduce uncertainty for businesses that have been impacted by coronavirus.

A report by The Times said that the government is understood to be considering two forms of online sales tax, including a 2% tax on goods sold online that would raise about £2bn a year and a mandatory charge on deliveries.

The scope of an online sales tax “would need further consideration”, the Treasury’s call for evidence said, and the government is “seeking evidence on the potential effects”. The call for evidence is part of a two-stage consultation that will reach its final conclusions in April 2021.