Following the series of financial packages announced by the UK government to support individuals and businesses through the coronavirus pandemic, one question has been on everyone’s mind:
How are we going to pay for it?
There had been hints and leaks that tax rises and austerity measures would be used to plug the £300 billion hole in public finances, which were subsequently denied. But the first official step has been taken by the government, with the Treasury consulting with industry on the best way to “provide a sustainable and meaningful revenue source for the government.”
Here is a summary of the proposed online sales tax, and how it could affect you if it is implemented.
What Is the Proposed Online Sales Tax?
There are actually two taxes being considered in relation to online sales.
The first is a two per cent tax on anything sold online. Early forecasts from the Treasury estimate that this will bring in an estimated amount of £2 billion each year.
However, note that this online sales tax is not the same as the digital services tax designed specifically for the likes of Facebook, Google and other international internet-based businesses which operate and have users in the UK.
Deliveries have increased significantly since the start of the pandemic, and the second proposal is to implement a tax on deliveries.
Why Were These Taxes Proposed?
The government believes that online retailers benefit disproportionately from the current tax system, while businesses with a physical High Street presence bear several financial burdens such as rents and business rates.
As the High Street has been in dire straits for a long time and is under even more pressure as a result of the pandemic, the thinking is that the £2 billion raised each year can be used to fund reductions in business rates for retail properties.
On the other hand, the delivery tax has been positioned as targeting traffic and congestion on the roads, with a view to achieving a reduction in toxic emissions and pollution.
When Will a Decision Be Made?
The government will make a decision on these proposals in the Spring of 2021.
And if you really want to know what I think about this proposed online sales tax? Have a look at my next post here.