Sunak Delays Consideration of U.K. Online Sales Tax to the Fall

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Chancellor of the Exchequer Rishi Sunak plans to delay consideration of an online sales tax until the fall as the pandemic prolongs uncertainty in the U.K. economy, two people familiar with the matter said.

The proposals, including a 2% tax on physical goods sold online, formed part of a wider review into the country’s business rates aimed at ensuring bricks-and-mortar shops aren’t at a disadvantage to online retailers. They were put to consultation last July, and an interim report is due next month.

Sunak Delays Consideration of U.K. Online Sales Tax to the Fall

While Sunak is due to unveil a budget on March 3, the final findings of the rates review will now be delayed until the fall, when he’s slated to hold a second budget, according to the people who spoke anonymously about unannounced plans. The Financial Times first reported the postponement.

With the U.K. still immersed in a third national lockdown to control the coronavirus pandemic, Sunak’s budget next month is set to focus on jobs and employment, including extending government support for workers that’s helped keep joblessness down over the past year.

Longer-term decisions such as the business rates reforms are being pushed to later in the year, when officials hope that a successful vaccination program will mean the economy can largely re-open, spurring the recovery from the country’s worst recession in 300 years.

Reopening Economy

On Monday, Prime Minister Boris Johnson will unveil a plan for reopening the economy, though he’s said it’ll be driven by data and not dates. That data includes coronavirus cases, deaths and hospitalizations. One of the people familiar with the matter said that the same principle will apply to extension and any potential tapering of the coronavirus aid programs.

One of the programs business groups are calling for to be extended in next month’s budget is a 10 billion-pound ($14 billion), one-year business rates holiday for hospitality, retail and leisure firms.

The business rates review was unveiled last summer in a call for evidence that said officials are “exploring the potential strengths and weaknesses of alternative property and online taxes put forward as possible replacements for rates.”

Politicians have long talked of the need to help traditional stores as they struggle to compete with internet retailers, a problem that’s only been made worse by the pandemic, which has forced many shops to close and driven more purchases online.

The Treasury’s proposals include overhauling the current tax to replace it with one based on the capital value of land and premises, which would be levied on the owner, rather than the occupying business. The proposed levy on online sales could help fund a reduction in business rates, it said. A 2% tax on online sales could raise 1.5 billion pounds a year, according to the House of Commons Treasury Committee.

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