What impact could an online sales tax have on the retail sector?

Reports | Retail

high street

The Chancellor Rishi Sunak is reportedly planning the introduction of a new online sales tax. Business Leader spoke to home delivery firm ParcelHero regarding Britain’s growing army of online shoppers and the impact any changes in tax could have on them.

Sunak is reportedly considering controversial plans to level the playing field between high street and online costs by introducing a new online sales tax. More details are likely to emerge in next month’s Spring Budget.

The plan follows a call this week from eighteen High Street retail bosses, including the heads of Tesco, Morrisons, Asda and Waterstones, to ensure online businesses pay similar tax to physical store sellers.

The home delivery expert ParcelHero is warning the new tax will impact on millions of home shoppers, however. It believes the tax will simply be passed straight on to the customer.

ParcelHero’s Head of Consumer Services, David Jinks MILT, says home shoppers should not be duped into footing the bill for the impact of Covid-19: “During lockdown, shoppers of all ages have turned to e-commerce so they can continue to shop safely from their own homes. That is a sensible choice and consumers must not be punished for being wary of shopping centres and crowded stores. The e-commerce giants aren’t going to pay through the nose – they will simply pass any new tax on to the consumer.

“Many people, particularly the elderly and the frail, are unable to risk shopping in-store because of the pandemic. These people, many of whom have turned to online shopping for the first time, would bear the brunt of the new tax. The rise of these so-called ‘silver surfers’ has helped keep down the spread of Covid.

“We entirely agree with the British Retail Consortium’s view that an online tax would hit High Street retailers who have online operations and result in higher costs for shoppers at a time of severe weakness in the British economy. It’s simply naive to think that most of today’s successful retailers are not already online. Those that aren’t are staring extinction squarely in the face and no new online tax can save them.

“Last year, the Treasury first floated its plans for a 2% online sales tax. Now it seems emboldened to try again to push through its new tax on the frail. A 2% levy on online sales is simply unfair on elderly or shielding people. Is it fair for them to pay towards the cost of the collapse of business rates’ income?

“It is Britain’s sky-high business rates that are the real cause of the long-term collapse of the High Street. Yes, they are currently suspended on retail properties because of the pandemic, but they are due to slam down on retailers again from April.

“Britain’s business rates are the highest in Europe and they cripple High Street retailers. Tackling these will help bring life back to our beleaguered town centres far more effectively than a new online sales tax.

“There’s speculation that the suspension of business rates could be extended beyond April as they are simply untenable now. Small wonder the Government is desperately trying to find other ways to tax retailers. The Treasury should stop dragging its heels and push forwards with long-awaited plans to abolish business rates and replace them with a “capital values tax” that would be based on the value of land and the buildings on it. This tax would be paid by the owner of the property rather than the business leasing it.

“The new tax plans are already having a negative impact on retailers. Asos, Boohoo and Ocado’s share prices dropped following press headlines of a new “Amazon Tax”. Where is the sense in penalising remaining successful retailers because of a forced changed in the nation’s shopping habits? The Government is being mendacious if it pretends this plan is anything other than a desperate attempt to boost its coffers

“It’s also staggering that the new online sales tax is being sold to the public as an “Amazon Tax”. The Government already introduced an Amazon Tax last April. A Digital Service Tax of 2% was introduced last year to ensure overseas e-commerce giants pay their fair share of tax in the UK. It is being levied on the likes of Amazon and Google.

“Surprise, surprise, as we warned at the time, the international tech giants simply passed the cost on to companies using their services, who then passed it on to their customers. Amazon increased seller fees on its platform in response to the tax and Google slapped it on UK Google and YouTube ads as an additional fee to advertisers… who then passed the cost on to their customers.

“It’s a perfect demonstration that long-suffering shoppers are at the bottom of the tax chain – they’re the ones who foot the final bill. Brits are in danger of being taxed till the pips squeak just for shopping safely online. The Government should be ashamed of this blatantly opportunistic proposal. It artificially pits High Street against online sales, undermining the omnichannel future of shopping that is so clearly the best way forward for both shoppers and retailers.”

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