Rishi Sunak has today said a global online tax on internet giants like Amazon and Facebook is “in our grasp”.
Sunak said he was “very keen to see a resolution” on the issue, with the chancellor making it one of his top three priorities in G7 meetings this year that are hosted by the UK.
Bricks and mortar companies have a higher tax burden in the UK than many online companies, with business rates based on the value of properties used in the course of business.
However, international agreement is needed on any new comprehensive online tax as the Organisation for Economic Co-operation and Development (OECD) oversees treaties on how profits of multinationals are taxed.
The Treasury unilaterally implemented its own digital services tax last year on online marketplaces, like Amazon and Asos, for the business they do in the UK, however the chancellor has said it is only a stopgap until when a global tech tax can be agreed.
Sunak is hoping that other finance ministers, particularly US secretary of Treasury Janet Yellen, will come together at July’s G7 meeting in Cornwall to agree on a new online tax on the globe’s tech giants.
In an event with Bloomberg today, the chancellor said the current tax system was not “designed for digital economy we find ourselves operating in” and that “it’s reasonable they need to be updated to take into account that physical activity isn’t the only driving force when you think about profits”.
“I think that solution is in our grasp,” he said.
“It is an issue that, perhaps for international forums like this, has a lot of resonance to the citizens we represent. They care about fairness in the tax system, this is an issue that has cut through an they want a decision on it.
“It’s in everyone’s interest from a corporate perspective to have a multilateral solution because it will provide consistency and certainty.”
High Street businesses have suffered in the past year as Covid restrictions have forced many to keep their doors shut or operate at a very limited capacity.
Meanwhile, companies like Amazon and Asos have seen soaring profits as more people shop online.
This has led to an increased call from large UK retailers for a more even tax system between digital and bricks and mortar companies.
Chief executives from major retailers and supermarkets, including Tesco and Asda, last month called on the government to implement a new sales tax to level the playing field between bricks and mortar and online retail.
“Reducing business rates for retailers and rebalancing the tax system to ensure online retailers pay a fair share of tax would be revenue-neutral, provide a vital boost to bricks and mortar retailers and support communities in need of levelling up,” they said.