Over the last two years the retail industry has – under the most difficult circumstances – provided an essential service to the public and kept households and businesses supplied with the goods they needed. But the pandemic took a toll on our high streets, with a rapid decline in footfall. The government responded, safeguarding businesses and jobs with a wide range of economic support through the pandemic to date. This includes exceptional tax relief for retail, hospitality, and leisure businesses. Longer term challenges do, however, remain.
The pandemic accelerated trends already underway, including a rapid growth in the proportion of shopping carried out online. Some have suggested that the tax system exacerbates the challenges faced by the in-store retail sector. The government recently completed a Review of Business Rates which led to £7 billion of support to reduce the burden of rates over the next five years and brought about reforms which will make the system fairer. The review concluded that the business rates system should not be ripped up, as rates fund vital local services and there is no alternative with widespread support that would raise sufficient revenue to replace them.
Some stakeholders have called for an online sales tax (OST) that could be used to rebalance the tax system, funding business rates relief for the retail sector. Given the significant changes in the retail market and shift online, it is right that the government reassesses the taxation of this sector. The government would like to consider further the case for and against implementing such a tax, including the role it could play in addressing challenges identified by stakeholders. It will be important to assess the effects on consumers and businesses before deciding whether to proceed with an OST.
If an OST were adopted, its design would not be straightforward. Distinguishing between online and offline activity presents a growing challenge. The government would like to hear from businesses on several central questions including which transactions would be taxable; the different forms an OST could take; and how to define an online sale reflecting the range of transaction, delivery, and collection options.
Source gov.uk
