Why is Pimlico Plumbers founder Charlie Mullins advocating for this business tax?
The Treasury has launched a review into VAT and the sharing economy and in particular platform apps, which do not have to pay the tax. The government believes that these apps could cost the Treasury as much as £20billion in lost tax revenue as more businesses moves online.
It is looking at operators like Uber, Airbnb and online freelance labour app Taskrabbit, which pay nothing because the individual drivers, room renters and labourers fall below earning the VAT threshold of £85,000 turnover.
These businesses claim to be market disrupters, but in my experience that doesn’t always come from technology, but by doing things differently, better and by providing customers with a quality service.
Pimlico has always been agile to changes in the market, often being ahead of them, and we use technology wherever we can to make our business more efficient.
At a time when economists suggest that the Chancellor Rishi Sunak will need about £30bn to keep pace with the level of national debt as a share of GDP, getting these internet companies to pay VAT is good old-fashioned common sense.
However, it’s not just about helping to rescue the economy from the depth of a COVID-induced recession that has left the public purse as empty as a pub during lockdown, it’s about providing a level playing field for all businesses.
Like all trends, what always follows is a flood of lemming firms that adopt the same model, which the Treasury worries will lead to more and more businesses using these digital platforms to take advantage of this tax benefit that allows them to charge lower prices.
Frankly, that’s just not equitable to the many so-called traditional businesses that toil away in the same sectors, but are burdened with paying a tax that their rivals can legally avoid.
These firms will argue that they are disruptive businesses that bring something new to the market for the benefit of their customers. In some cases that may be true, but it doesn’t entitle them to be treated differently to everyone else.
Unfortunately, the precedent has already been set by the high-profile disparity between the tax contributions of online retailers like Amazon, who paid £293m tax against more than £13bn sales last year, and their bricks and mortar counterparts.
Hopefully, in the same way a 2% digital sales tax was brought in back in April this year, the change can also be made to the VAT rules.
I strongly support the Treasury’s VAT review and aim to make my views known as platforms, users and rival companies will be consulted.
Quite simply, technology should be embraced to improve business, not give an unfair advantage to internet firms due to a quirk in the tax system.
Keeping the system as it is just puts more pressure on traditional businesses who face unfair discrimination while internet firms can clean up without making a fair contribution to the economy.