Following the announcement in last year’s autumn budget of a proposed consultation into a brand-new online sales tax, the Government has remained silent on the topic. That silence was broken, however, last week when the Government published an early-stage consultation exploring the arguments for and against the proposed tax.
For those who aren’t familiar with the proposal, it comes off the back of concerns from some of the UK’s most well-known high street businesses that there is currently a huge imbalance between high-street and online retail. Figures from the ONS show that online spending now accounts for about 30% of overall retail sales in Britain, compared to just 20% a year ago. The hope of those businesses was that such a tax could help to redress this imbalance by funding a reduction in business rates for the retail sector, throwing high-street retail a monetary lifeline.
The onslaught of online retail and the demise of the high street, fuelled in no small part by 18 months of on-again-off-again lockdowns, isn’t news to anyone, and high-street retailers have been struggling to keep up with their online counterparts for some time. Therefore, the announcement last week that a consultation has begun seems like it would be good news for those retailers. However, the flip side to this is many bricks-and-mortar businesses diversified during the pandemic and also started also trading online, and so for those retailers any new online sales tax would be both a benefit and a burden.
There is of course also the issue of what this will mean for consumers; will we see prices increase in order for online retailers to recoup some of the loss? At a time where inflation is at the highest it’s been since the early 90’s, and energy prices are expected to rise by up to 50% in a few months’ time, the average consumer’s pockets are already pretty shallow. It seems that any additional measures that could potentially make that worse will need to be very seriously considered in the context of what is expected to be a very tough year financially.
My colleague Matthew Rowbotham also discusses this issue in his article 'It’s a Sin (Tax)' published as part of The Collective’s Business in 2022 Report. Click here to view Matthew's article and click here download a copy of the full Report.
The consultation will run from 25 February to 20 May 2022, for more information on the consultation and for details of how stakeholders can submit their views, click here.
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.