Rishi Sunak is considering plans for a new tax on goods sold online as the government looks for ways to raise income and protect the high street amid the Covid-19 pandemic.
A call for evidence on the issue announced last week acknowledged that many retailers are opposed to such a levy but noted that the existing business rates system favoured online firms over those with high-rental value shops.
Downing Street said the coronavirus pandemic had already had a “significant impact” on the way business is done and the government needed to ensure that the tax system raised enough money to fund public services.
The call for evidence was examining the business rates system and potential alternatives.
“As part of this we will consider the case for introducing alternative taxes as part of the review, including an online sales tax,” the spokesperson said.
“The pandemic has had a significant impact on how business is done and the effect of this will become clearer over time.
“We will continue to support businesses as far as possible but we must also ensure that the tax system raises sufficient revenue to fund our vital public services.”
The government is facing a hole in the public finances of more than £322bn. Economists have warned that the worst of the economic fall out from the virus is yet to come.
The chancellor himself has acknowledged that Britain is headed for a deep recession.
The consultation document notes that “some commentators argue that the business rates system creates a distortion within the retail sector, favouring online retailers that can operate without the high-value properties that are a feature of more traditional retail”.
“This has led to proposals that the government should levy a tax on companies based on their online sales, and that this could be used to fund business rates reductions for retail properties,” the document said.
Mr Sunak is consdering two types of taxes, according to The Times.
The first is a levy of about 2 per cent on all goods bought online. The Treasury hopes this could bring in around £2bn per year.
The second measure is a tax on consumer deliveries. Officials say the move will help cut traffic on the roads and thereby reduce pollution.
But critics have argued that the proposals would mean increasing costs for consumers make it harder for offline retailers to set up their own Internet stores.
Tom Ironside, director of business and regulation at trade body the British Retail Consortium (BRC), said: “Taxing the sale or delivery of online goods would simply be another burden on an already overtaxed industry; one that would ultimately hit consumer spending through higher prices.”
Additional reporting by Press Association
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