The introduction of a new online sales tax would “kneecap” retailers and have a disproportionate impact on smaller businesses, UK startups have warned.
In his Budget tomorrow, chancellor Rishi Sunak is expected to launch a consultation on new levies targeting online retailers such as Amazon and Asos that have seen their profits soar during the pandemic.
But British startups have warned the tax would unfairly penalise retailers and traders who have shifted online to adapt to coronavirus lockdowns.
“If the government wants to make life easier for retailers, kneecapping businesses who sell online isn’t the way to do it,” Dom Hallas, executive director of startup body Coadec, told City A.M.
“Not only would an online sales tax punish companies for succeeding and stamp on a bright spot for the British economy in the past year, it would also unfairly punish small businesses pivoting successfully to new business models.”
The charge would form part of the government’s efforts to level the playing field for brick-and-mortar retailers that have seen their sales battered by repeated lockdowns.
But a retail industry source said any new tax would “hurt any business which has shifted more focus to online in order to meet consumer demand”.
The online sales tax is one of a number of new levies being considered as the Treasury attempts to rebalance the country’s finances after public borrowing ballooned during the pandemic.
Ministers are expected to launch a raft of consultations on 23 March — a day that has been dubbed “tax day” in Whitehall and marks one year since the first lockdown was introduced.
Discussions over an online tax are understood to be at an early stage, but it could come in the form of a new green tax on online delivery items.
Any new measures would come on top of the digital services tax introduced by Sunak last year, which charges two per cent on the UK-derived revenues of online businesses.
“The key to reviving our high streets is fundamental reform of the business rates system and we oppose any new taxes that increase the cost burden on the industry which is already too high,” said Helen Dickinson, chief executive of the British Retail Consortium.
“Economic recovery after Covid will be powered by consumer demand — the chancellor should ensure he doesn’t introduce any new taxes that stifle this.”