Why has the Government made this move now?
It was announced at the time of the Autumn Budget that a consultation would be published exploring arguments for and against the introduction of an OST. This step came in response to concerns expressed by businesses that in-store retailers and their online counterparts were treated differently from a tax perspective.
The Government said it was “right” to take another look at how the UK retail industry was taxed, given what it described as “the significant changes in the retail market and shift online.”
It was also stressed, however, that no decision had yet been made as to whether online retailers would become subject to a new tax on their sales.
“We want to see thriving high streets and a fair economy”
Financial Secretary to the Treasury, Lucy Frazer, stated: “We want to see thriving high streets and a fair economy as we move forward from the pandemic, which is why our business rates review cut the burden by £7 billion for businesses and committed to look at an Online Sales Tax – given the imbalance identified by some between online and in-store retailers.
“Whilst we’ve made no decision on whether to introduce such a tax, it’s right that, given the growing consumer trend to shop online, we work with stakeholders to assess the appropriate taxation of the retail sector.”
The consultation started on 25th February and is set to run to 20th May 2022. It will ask stakeholders for their views in relation to how an Online Sales Tax could be designed, including which products and services could be within the scope of an OST, and whether it should be a revenue-based or flat-fee tax, the latter based on the number of transactions or deliveries. The online sales consultation is now available to read for interested parties.
Describing the issue of whether to introduce an Online Sales Tax as “complex”, the Government said that if it did proceed with such a tax, the revenue it generated would be used to fund a lowering of business rates for retailers with properties in England, in addition to funding “the block grants of the devolved administrations in the usual way.”
The Treasury further explained that if a decision was made in favour of an OST, “the precise nature of associated business rate reductions will be considered at a later date.”
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