It is a truth universally acknowledged, that a Chancellor faced with a troubled high street, must be in want of a tax overhaul.  And this Chancellor is thinking big, with the whole of the business rates system potentially up for replacement.

The figures from the Office for National Statistics illustrate - in sobering fashion - the impact of Covid-19 on the high street's share of the retail market.  Online shopping has been steadily gaining ground as a percentage of total retail sales, from around 10% in 2012 to 20% in February 2020.  By April this year they had rocketed to 30%.  While some of that boost may turn out to be temporary it doesn't bode well for physical shops.

So in a recent 'call for evidence' the Treasury is looking at the whole system of business rates and considering some fundamental reforms, including:

(1) replacing business rates (which are paid by the occupants of commercial property, and based on annual rental value) with a capital value tax levied on the freehold owners; and

(2) introducing an online retail sales tax for physical goods.

These are all tricky propositions.  Changing the person who pays a tax does not automatically change the tax's 'incidence' i.e. the person in the supply chain who typically bears the economic cost.  And an online sales tax on the other hand must be carefully structured not to distort behaviour in unexpected and unwanted ways.