Chancellor Rishi Sunak made the announcement last Friday (25 February), after promising the consultation in the Autumn Budget.
This comes after businesses expressed concerns about a potential tax imbalance between in-store retailers and online. The consultation will look at potential designs and impacts on consumers and businesses of implementing such a tax, and will run from 25 February to 20 May 2022.
BBPA chief executive Emma McClarkin said the trade body “welcomed” the Chancellor’s decision to open a consultation on Online Sales Tax, as they had been calling for as part of fairer taxation review.
With pubs currently overpaying rates by £750m relative to their turnover, she believed an “urgent rebalancing [was] needed”.
McClarkin said: “Within our response we will be recommending the introduction of an Online Sales Tax explicitly used to reduce the burden of rates from physical properties, especially those ones that cannot shift to digital platforms, like the great British pub."
A fairer structure
She continued: “We agree with the stated aim this should not be a penalty on digital shopping, but rather a welcomed attempt at a fairer tax structure which recognises our modern economy.”
As part of the three-month consultation, stakeholders will be asked for their views on the challenges on the design of an Online Sales Tax, including which products and services would be in scope and whether it would be a flat-fee tax based on the number of transactions or deliveries, or a revenue-based tax.
The consultation will delve into what effect an Online Sales Tax would have on consumers and businesses alike, which will also be a key determining factor in policy decisions.
“We urge the Government to support the sector’s recovery by tackling the unfair business rates system and continuing to reduce the punitive tax burden on our sector to ensure the sustainability of brewing and pubs, and help us regenerate our high streets, towns and villages up and down the country,” according to McClarkin.
Appropriate taxation
Financial secretary to the Treasury Lucy Frazer said while no decision had been made yet to introduce such a tax, it was right that, given the growing consumer trend to shop online, the Government worked with stakeholders to assess the appropriate taxation of the retail sector.
She concluded: “We want to see thriving high streets and a fair economy as we move forward from the pandemic, which is why our business rates review cut the burden by £7 billion for businesses, and committed to look at an Online Sales Tax - given the imbalance identified by some between online and in-store retailers.”
Should the Government proceed with an Online Sales Tax, the precise nature of associated business rate reductions will be considered at a later date.
