2% UK online sales tax or delivery tax under consideration

By Chris Dawson July 27, 2020 - 9:37 pm

How would you like to collect a UK online sales tax of 2%, on top of collecting VAT? No? Didn’t think so, but that’s one of the ideas the Chancellor is considering. An alternative proposal is a tax on deliveries to consumers. Or maybe we’ll get both? The former is expected to raise about £2 billion a year in tax and the latter to reduce traffic and pollution.

Oh, and this tax is not an alternative to the Mandatory Delivery Charge idea that’s been mooted – that’s a separate project.

The problem is that High Street retail is a basket case, has been for years and is even more so since the Coronavirus pandemic as no one fancies crossing their fingers that wearing a mask will keep other people safe. The reality is that some don’t care and those that do (maybe as many as 60%), have absolutely no intention of revisiting the High Street any time soon.

The argument goes that the High Street pay hefty Business Rates which online retailers don’t. So to protect the high street how about we simply ding online businesses with a new UK online sales tax. This argument falls down on so many levels, not least of which that Business Rates are roughly equivalent to Council Tax for domestic properties and is based on real estate and not on sales. Online retailers do of course pay Business Rates on their premises – they just opt for premises that aren’t on the High Street and they have fewer properties to pay the tax on.

The real issue here however is that a UK online sales tax won’t be anywhere near as punitive on the large online retailers as it will on the small and medium businesses that form the backbone of the economy. It won’t hit eBay as they don’t sell anything and over half of what’s sold on Amazon is sold by a small business anyway.

It’s also worth bearing in mind that half the High Street also sell online so if they save on Business Rates on their real estate of shops they’ll pick up additional tax through the back door with the proposed UK online sales tax. The other half of the High Street is largely made up of Charity shops and they get between 80% and 100% off their Business Rates anyway.

Of course ultimately, it won’t be online retailers that pick up the tab, it will be the consumer who foots the bill as all that will happen is that prices will rise. Even if the Internet Giants such as Amazon and eBay are forced to collect the tax they’d pass it on in fees and force sellers to pass it on in higher prices. The alternative is for the retailers to be forced to collect the sales tax and let’s not forget that many small online retailers aren’t VAT registered so there’s a whole mess of the burden of administration to take into account.

It’s fair to say that there is a massive hole in public finances due to the Coronavirus and it’s equally fair to say that online retail has grown massively over the past four months.

However it’s not fair to say that a new UK online sales tax or delivery tax would save the High Street – all that’s happened during the lock down is an acceleration in the decline of High Street retail and making online prices slightly higher is not going to reverse this trend any time soon. All it will do is impose administration burdens and costs on an industry largely made up of small businesses and increase prices to consumers.

Business Rates do need to be revisited, but let’s not make it an excuse to put small online retailers out of business.

  • Ifellow
    1 year ago

    You have to pay business rates on warehousing aswell.

    Warehousing or distribution centres are not exempt from business rates.

    Anyway first stop the blatant evasion and do your job, before coming round with your begging bowl.

  • NorthCrystal
    1 year ago

    Fixing traffic by introducing online sales tax… Sounds bizarre but then I don’t possess the information the government might have but then most of (current) government ministers are not very bright shall I say.

    IMO this is stupid idea. The politicians should focus how to make Amazon/Starbucks/etc pay their taxes properly but they are afraid. Much easier to target thousand of small businesses than one business belonging to the richest man on earth.

    • victor
      1 year ago

      taxing hundreds of thousands of small business, would gain a lot more revenue than a few rich businesses , even if you squeezed them dry

  • Ifellow
    1 year ago

    So 200 people driving to the high street causes less pollution than 1 van doing 200 deliveries a day?

    Brexit science @conservatives hq.

  • MS
    1 year ago

    Let’s not forget the 2% digital services tax which may be indirectly billed, through the marketplaces’ increased fees.

  • victor
    1 year ago

    collected by the market place or payment provider would be the obvious course,
    with the systems already in place , evasion would be near impossible

  • Taxing cars to save the horse and cart industry.

  • toby
    1 year ago

    So in order to support a dying sales area you should punish an evolution of it?
    Excellent idea.
    The fact is people like convenience. They like shopping when they want from the comfort of their homes etc. They want to be able to check out many shops together and quickly.
    They don’t want to spend ages in traffic, then drive around looking for an over priced parking space, followed by a long walk and carrying stuff.
    Why not accept that retail highstreets are simply dying out. Times change.
    Instead turn the high street in to a more leisure based set up?
    If not… Lets punish home owners so we can get people back into mud huts and caves.

  • victor
    1 year ago

    nothing to do with punishment or penalties, just simple economics
    if the high st fails to provide revenue ,it has to be found elsewhere

    • Barry S.
      1 year ago

      There is plenty of fat to trim from the budget before you get to punishing small businesses.

      Instead Rishi wants to bail out the banks, property developers, restaurant chains and airlines. So to an extent you are correct – they have to rob the money from somewhere.

    • ifellow
      1 year ago

      Actually it’s the Chinese traders that kill off the high street. A cable may have been, £7 on and £11 in Maplin, but id often just go Maplins and get it the same day so I could use an item it connected too same day, I’m sure many other did the same. I used to work at Sony Centre back then the bulk of our sales were from accessories. Its what kept us in business.

      All of a sudden Chinese traders that £11 Maplin, and £7 on line cable became £2.50 free postage.

      The government, HMRC and HM treasury left this unchecked for at least 7 years. Hence destroyed high street retailers and in fact, also many online traders also destroyed or relying on TAX CREDITS to live.

    • ifellow
      1 year ago

      Actually most of the Sony accessories found online are fake, but again no one seems to care and it’s been left unchecked. Hence many Sony Centres have also closed down.

      UK Retails dying because foreign bad actors have cheap, easy, unlimited and tax-free access to the market.

      Who thought it was a good idea to let 4PX a Chinese state control company to have huge fulfilment centres in the UK serving Chinese traders for instance?

  • 1 year ago

    Victor is right.

    Come on – 2% is nothing – £0.30 on a £15 item. Bear in mind prices in stores will have to go up at least 20% to cover overheads due to drop in footfall.

    economics kicks in, as things get more efficient (online vs Retail) the tax burden will need to rise for online to pay for increases in NHS and social care. Nearly all taxes are connected to individuals so either pay through working taxes or pay through spending taxes or pay through assets taxes – Which one?

    Increasing international trade results in making money from other countries to help finance our requirements, but we manufacture very little and our R&D for tech is too low to increase digital or IP revenues enough to make a difference. This all comes back to education in schools which needs massive reform, its so old fashioned now.

    • NorthCrystal
      1 year ago

      Yeah, perhaps 2% is nothing but as as small business owner, and father of “young family” I would prefer to keep those 2% to myself.

      Examples: bought little freezer £450 – 2% of that is only £9 but that’s some nice beer or two there for the father 😉

      Shelf racking to the warehouse: £3000 – £60 for the “pleasure” I cannot go out and buy the industrial racking on the high street. LOL

      The rich landlords of high street properties are trying the last dip to get some extra cash, before that 150 year old “department store” will change its use to dwelling soon.

  • Marc
    1 year ago

    That is what VAT is for it used to be 10% and lower, but now 20% so this would rise from 2% every year for sure once in place. So what did the goverment do with the extra 10% of VAT, apart from unsustainable public sector pensions, and other excessive expenses and mostly pushed in to the long grass by successive governments? Why should there be an online tax to support other businesses.

    • victor
      1 year ago

      why should online be exempt from tax ?
      its earning money from UK society!

    • 1 year ago

      That’s right, online is exempt from tax and should pay more.

      Exempt, apart from 20% VAT.
      Apart from business rates on warehouses that don’t benefit from all the grants recently given to high street shops.
      Apart from higher Council Tax for those who choose to work from home and have chosen to live in a larger house in a higher tax band which gives their business the space to operate at the expense of living space.
      Apart from the PAYE, NIC and ER NIC for their staff.
      Apart from Corporation Tax if they are limited companies (which in many cases meant they got sweet FA support during the pandemic, even though they’ve now got to pay for it in increased taxation).
      Apart from Insurance Premium Tax on the insurance they bought when it turns out that “business interruption cover” doesn’t cover them when there’s a pandemic.

      So yeah, of course small online businesses are exempt from tax…..

    • ifellow
      1 year ago

      The government have stood aside whilst marketplaces like Amazon and eBay and their Chinese partners have ripped online sellers apart FOR YEARS DESPITE IT BEING BLATANT AND OPEN for what must have been their own agendas, let alone stopped all the Chinese Shopify, aliexpress and others ripping into online sellers.

      Now they want us to pay more, what a complete joke.

  • 1 year ago

    Well said alonicus, Online is not exempt from tax unless you have a better accountant than us. We have adapted quicker perhaps to the world, but should we be penalised for that?

  • SAM
    1 year ago

    Am afraid the Tories can go and tax the likes of Amazon,Facebook, Google, and eBay on the billions of tax they have dodged over the years first. Ohh and all the China sellers also.
    Backdate it and you would probably pay of the Covid Debt. They won’t however because they probably have been paid off. The whole country knows it.
    It is backwards and they should be investing in the UK Online industry, but they prefer to look after the banks and their landlord pals who are going to lose a ton of money when everyone goes remote anyway.
    Watched that Webiner last week (till eBay started on about GSP and switched off ) that Liz Trust does not have a breeze like the rest of them.
    All they see is Amazon creating thousands of zero hours jobs (and making people sign anti slavery declarations) and thinking they are doing a great job.

    • Ifellow
      1 year ago

      We employe 500,000 people

      ( all on 2 hour a week contracts)

      Enough to make Brexit Torie go weak in the knees.

  • Ifellow
    1 year ago

    It’s not the 2% it’s the fact that such a useless inbred bunch of useless self intrest bell ends, think this okay after HMRCs complete failure to tackle Chinese vat fraud. Which STILL NOTHING DONE. Those complicit and benefiting still are.

    It’s not okay.

  • Victor
    1 year ago

    We agree all the registered businesses who trade on line pay their share of tax in many ways
    Though there are thousands circumventing the the tax system Online ,
    who pay no tax at all, indeed some even claim benefits
    An online tax could help offset this
    It might even be an option to claim some of this tax back, similar to vat

    • Ifellow
      1 year ago

      So honest busineses should pay more because Hmrc are complete morons and in the pocket of the Chinese government.

  • Marc Sutter
    1 year ago

    Well said particularly about Chinese sellers when the employees responsible from HMRC and the Goverment are all lined up on poles like Vlad the impaler and at the very least explain in public beforehand why they did nothing or is as is more likely paid off on their gold plated pensions, it would just be a small start. Pay us back what we and the Country have lost because of their incompetence then we can talk.

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