The Government announced an intention to introduce such a tax from April 2020 to ensure there is a level playing field between high street businesses and online behemoths.
Pub trade bodies have said the Government must ensure revenue from a tax on online businesses is used to reduce the burden that the sector faces from business rates.
The All-Party Parliamentary Group for Hospitality discussed the tax as a potential remedy in a report on the issues the sector had encountered with business rates.
The report read: “A digital services tax to allow for a cut in business rates is often cited as the perfect means to allow the Government to maintain the revenue that it receives but also to shift the tax burden to the online sector.
“However, this will deliver only a fraction of the amount collected from property through business rates – at around 1.3%.”
“There has, however, been no indication that a digital service tax of any amount would be used to reduce the burden that the sector faces,” it said.
Unfairly hammered
UKHospitality chief executive Kate Nicholls said that the tax was a welcome first step but the system would only be fair when the tax burden on pubs was reduced.
She said: “At present, we have a completely skewed corporate taxation regime that, in no way, properly reflects the realities of the modern economy.
“High street hospitality venues, such as pubs, are necessarily more property-intensive than digital businesses, and are being unfairly hammered by business rates.
“The digital services tax was, hopefully, just the first positive step from the Government in rebalancing the burden, acknowledging that digital businesses are not being taxed to the extent that other businesses are.”
Nicholls added: “It is vital that, as soon as the general election is over and some clarity on Brexit provided, the Government pushes ahead with a domestic legislative agenda that includes the digital services tax and a full review of the entire rates system.”
The Treasury Committee published a report this week (31 October) that urged the Government to look into alternatives to the current business rates system, which it described as “broken”.
Fundamental inequality
Nick Griffin, chief executive of the Licensees Association and multi-site operator, said he saw the tax as “one way forward” but it “should not be seen as a panacea”.
He added: “Without the root-and-branch reform we call for, we will still face similar issues within the sector, with rates relief being less likely to be given to those who successfully operate our pubs and who over-trade.
“While we have fair maintainable trade values, which seem to be arrived at simply by taking given trading figures, we are faced, in essence, with a sales tax and not a property one.
“Until we get to grips with the fundamental inequity in the current system, we will continue to store up issues within the pub industry.”
Operator Louise Dinnes who operates the the Black Swan, in Ravenstonedale, Cumbria, said she felt “cynical” about the prospect of revenue being used to help pubs.
She said: “It sounds great but I don’t think for one minute we would see any of it.
“The other pub in our village closed last week because of high overheads and was not able to survive.”
