Sunak Mulls Online Sales Tax to Help Save U.K. High Street Shops

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Chancellor of the Exchequer Rishi Sunak is considering plans to tax online retailers in a bid to save shops reeling from the coronavirus lockdown and revive Britain’s town centers.

The proposals form part of a call for evidence opened last week by the Treasury as it conducts a review of the system of business rates imposed on bricks-and-mortar shops and offices. Officials are “exploring the potential strengths and weaknesses of alternative property and online taxes put forward as possible replacements for rates,” it said.

Politicians have long talked of the need to help traditional stores as they struggle to compete with internet retailers, a problem exacerbated by the pandemic, which has driven more purchases online. At the last election, Prime Minister Boris Johnson pledged to revive towns that have been left behind, and promised tax breaks for shops, pubs and restaurants.

Sunak has already rolled out a one-year business rates holiday for hospitality, retail and leisure firms to help them weather the pandemic, at a cost of about 10 billion pounds ($13 billion), according to the document.

Under the current system of business rates, which dates back to 1990, about two million shops, offices and factories are subject to the levy, which is based on the rental value of their premises. The so-called rateable value is reviewed periodically, with new valuations set to be used from 2023 after the pandemic forced the government to postpone a revaluation due next year.

Online Sales Tax

The Treasury said it will consider 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. It also said it will look at bringing in a levy on online retailers that could be used to fund a reduction in business rates for bricks-and-mortar shops.

“Given that an online sales tax would be unlikely to raise revenue sufficient to replace business rates, we expect that any such tax would exist alongside business rates,” the Treasury said. “Any move towards the introduction of a new tax would be a long-term proposition.”

Officials will examine options laid out in a report in October by the House of Commons Treasury Committee, which scrutinizes the department’s work, the department said.

Those options included a proposal to impose a 2% tax on physical goods sold online, which could raise 1.5 billion pounds a year. That would then be used to fund a reduction in business rates.

©2020 Bloomberg L.P.

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