Rishi Sunak is weighing up a new online sales tax to raise £2 billion a year for the Treasury and to stop the high street from collapsing amid the coronavirus pandemic.
With the High Street decimated amid the coronavirus lockdown and huge numbers of job cuts and store closures, the chancellor is looking at proposals to level the playing field.
He is examining introducing an online sales tax to provide a ‘sustainable and meaningful revenue source for the government’, while allowing physical stores to compete.
The two forms of tax being looked at include a two per cent levy on goods sold online, which could raise £2 billion a year for the government, and a charge on deliveries to cut congestion and carbon emissions.
The Treasury said last week that the pandemic ‘has had a significant impact on how business is done’, requiring the government to ensure ‘the tax system raises sufficient revenue’.
It highlighted concerns that business rates were penalising high street stores as online rivals did not need to pay them.
The abolition of business rates altogether is being considered.
They would be replaced with a ‘capital values tax’ which would be based on the value of land and the buildings on it.
The tax would then be paid by the owner of the land rather than the business leasing it.
However, there are fears that the online tax proposals could lead to consumers having to pay more, according to the Times.
The Treasury said: ‘The pandemic has had a significant impact on how business is done, particularly for firms which rely on customers visiting them.
‘The full impact of this will become clear over time. As the economy moves towards recovery the government will continue to support businesses as far as possible, but it must also ensure that the tax system raises sufficient revenue to fund the services that have been essential parts of the pandemic response.’
The business rates system is currently based on shop rental values, which are calculated every five years.
They are paid by tenants, the businesses leasing the property, rather than landowners.
However the system has come under fire as companies that need a presence in town centres pay higher rates than their online and out-of-town rivals.
During lockdown, the chancellor introduced a £10 billion business rates holiday for the retail hospitality and leisure sectors for one year.
Although this helped businesses, the Treasury reported that it lead to a 40 per cent drop in revenue from business rates.
However, despite the appetite for reform, there is a fear that an online sales tax ‘would simply increase the costs for consumers of regularly purchased items’.