An online sales tax would be “a huge mistake” retailers have warned as the industry splits in its support for the controversial tax.
Retailers across the UK are vehemently voicing both their support and opposition to an “Amazon Tax” which is expected to be announced in the Spring Budget next week.
While British retailers almost unanimously agree that business rates desperately need reforming, few agree on whether an online sales tax is an effective solution to balance the playing field between physical and online retailers.
Treasury officials are understood to have been meeting with business leaders in private to explore how an online sales tax, which is likely to impose a two-percent levy on all sales made online in the UK, would work.
Many have warned that this could not only actually raise taxes for physical retailers like John Lewis and Next which have significant online operations, but would also hamper independent retailers at a crucial impasse for the British economy.
“As we approach the budget, an online sales tax would be a huge mistake from Chancellor, Rishi Sunak,” chief executive of UK online marketplace OnBuy Cas Paton said.
“While it’s been nicknamed the ‘Amazon Tax’, the reality is that it won’t impact the big players in the market but will stifle the growth of so many independent British retailers which have relied on online sales as a lifeline over the past twelve months.
“As an online marketplace, we’ll of course feel the impact of this type of tax, but I am far more concerned about the millions of entrepreneurs and SMEs across the country.
“Over 6,000 independent British retailers sell on OnBuy and it is those business owners that will take the hit. It won’t touch the sides when it comes to the big corporates.”
ParcelHero’s head of consumer research David Jinks added: “Ironically, a new tax supposedly aimed at saving town centre stores may drive the final nail into their coffins by slashing their online sales.
“The Chancellor should not make UK’s beleaguered online shoppers and indie stores pay the price for lost business rates income.
“The new tax would hit shoppers and remaining retailers alike. Those High Street outlets that find ways to survive must have websites as well as physical stores. A new online sales tax will leave most retailers paying a second raft of taxes.”
The tax would generate significant proceeds, seeing Amazon alone paying roughly £380 million in tax on sales equivalent to those made in 2020, dramatically more than the £19 million it paid under the current system.
These proceeds could then be used to offset business rates bills, which have been cited as the key factor leading to the collapse of countless high street giants over the last two years.
Business rates bills are currently calculated by applying a tax “multiplier” to the annual rental value of a property.
An online sales tax could potentially see this multiplier drop from 50 per cent to around 35 per cent, returning to levels seen in 1990 and providing a welcome reprieve for retailers which rely on their vast store estates, like Primark.
However, as John Lewis’ executive director for operations Andrew Murphy pointed out, taxing online sales is “highly likely to harm the very businesses that such a move would seek to support.”