The UK Government’s proposed tax on online sales could have a significant impact on travel businesses, according to accounting company RSM.
The proposal, whose first consultation ended on Friday, is expected to level the playing field between physical and online retailers, as well as bringing down the cost of rentals.
According to RSM UK’s head of travel and tourism Ian Bell, a lack of understanding over how this will work out in practice could put the travel sector at a disadvantage.
The industry is concerned that the tax could apply to giants such as Skyscanner or Hotels.com, which in turn could pass the extra costs to the businesses that use their websites.
“If services are included within the scope, then online travel agents and some tour operators may find themselves liable for a new tax in the years ahead,” Bell explained.
“Businesses will need sufficient warning of the introduction of any new taxes given that seasonal commitments and pricing are often set many months ahead.”
Bell argued that there are still a lot of questions regarding how the tax will be implemented, and especially if it will be applicable to travel operators or agents providing a service to businesses or if it will be only focused on business to consumers’ transactions.
“The sector is hoping for a bounce back this year after the removal of travel restrictions and making the most of the pent-up demand for holidays post-Covid,” Bell continued.
“However, this boost could be hampered by the cost of living crisis, so the last thing the sector needs now is the threat of additional taxes.
“With current economic headwinds, the cost of living squeeze and pandemic savings being depleted, there are already fears that next year could be a tough year for the industry.”
RSM is not the only industry stakeholder to lobby against the tax.
“Tourism is a significant contributor to strong, vibrant high streets as one of the main activities that visitors undertake at a destination is shopping,” Tourism Alliance’s director Kurt Janson told City A.M.
“Therefore, the application of an Online Sales Tax to the tourism industry would not just reduce the revenue and employment benefits local economies receive from from tourism, it would end up harming the very high street shops that the proposal was aiming to support.”
Janson’s words were echoed by Joss Croft, chief executive of UKinbound, who called the tax “counter-intuitive.”
“UK tour operators, that specialise in brining international visitors to the UK, saw their turnover reduce by over 90 per cent and although we are seeing green shoots of recovery, we’re only expecting to reach between 60 and 70 per cent of 2019 numbers this year,” he told City A.M.
“Businesses are also facing supply chain issues, from rising costs to recruitment challenges, which will only be exacerbated if a new tax is imposed on their online activity.
“The UK currently sits bottom of the global price index table for its price competitiveness and a further tax will only make the UK more uncompetitive and hamper recovery.”
City A.M. has approached Booking.com, Kayak and Expedia, while Skyscanner denied to comment.