An online sales tax is one of the measures chancellor Rishi Sunak is reportedly mulling to reduce the government’s borrowing headache in the Budget, a week on Wednesday 27 October.
Its appeal is several-fold. Having already ruled out a reduction in business rates, despite protestations from retailers, it would go a little way to even up what shop owners say is an unfair advantage to online retailers, which don’t pay anywhere near as much.
It would raise around GBP2bn based on the last time it was brought up in a Budget, by Philip Hammond, and also ease criticisms that businesses that did well out of the coronavirus pandemic, such as online retailers, should help pay back some of the windfalls.
The Telegraph reported that the tax might involve two taxes, a levy on online purchases and a tax on deliveries, with Treasury staff currently working on what items might be included and what is left out.
Even at GBP2bn, the take for the Treasury will be dwarfed by business rates which bring in GBP25bn and that is linked to the value of a business’s premises.
These values are based on 2015 levels and retailers want them rebased to reflect the slide in high street values during the pandemic lockdown and also due to the rise in online shopping.
Britain already has one online tax – the digital sales tax – which is levied at 2% on the revenues of search engines, social media groups and online marketplaces, but this new ‘Amazon’ tax would be different.
But it’s not going to be finalised by next week, with the Telegraph reporting a source saying that any major announcement will not be made until spring and this time Sunak will announce a period of consultation.
Sunak has another tricky balancing decision with a record peacetime loan deficit of around GBP370bn to service due to the pandemic, with problems caused by the recent surge in energy prices adding to his headaches.
That has seemingly put the kybosh on any rise in fuel duty, with prices already heading towards record levels.
This rise in petrol costs has already added GBP191 to the cost of filling a normal car.
National Insurance went up in April to howls of protests from members of his own party, while the ending of the Universal Credit support scheme last month has been slammed for penalising the poorest sections of the community.
An FT report today, meanwhile, said VAT might be cut to ease some additional costs on households of the recent rise in gas prices.