Online sales tax could lead to reduced business rates

The UK government has published an early-stage consultation into an Online Sales Tax.

The UK government has published an early-stage consultation that explores the arguments for and against an Online Sales Tax (OST).

In what could lead to an eventual reduction in business rates for pubs and bars, the consultation follows concerns reported by businesses of a tax imbalance between high street operators and online businesses. 

The consultation was committed to at the autumn Budget as part of the government’s conclusion to its review of business rates, where stakeholders, including some of the UK’s most well-known high street businesses, called for an OST to help rebalance the tax system through funding a reduction in business rates for the retail sector.

“We welcome the chancellor’s decision to open a consultation on OST, which we have been calling for as part of fairer taxation review," says Emma McClarkin, chief executive of the British Beer & Pub Association. "Pubs currently overpay rates by £570m relative to their turnover and an urgent rebalancing is needed.

“Within our response we will be recommending the introduction of an OST explicitly used to reduce the burden of rates from physical properties, especially those ones that cannot shift to digital platforms, like the great British pub. We agree with the stated aim that this should not be a penalty on digital shopping, but rather a welcomed attempt at a fairer tax structure which recognises our modern economy."

As part of the three-month consultation, stakeholders will be asked for their views on the challenges on the design of an OST, including which products and services would be in scope and whether it would be a flat-fee tax based on the number of transactions or deliveries, or a revenue-based tax.

The consultation will run from 25 February to 20 May 2022​. While no decisions have been made yet as to whether to proceed, if implemented, revenue from such a tax would be used to fund reductions in business rates for retailers with properties in England and fund the block grants of the devolved administrations.


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