Government To Consult On Online Sales Tax – Which One? New
The government announced a consultation on a new “online sales tax” for online retailers in its fall 2021 Budget and Expenditure review.
Online shopping has skyrocketed during the pandemic, as high street retailers have been hit hard by the lockdown restrictions.
To address this imbalance and protect Main Street, the government is considering a UK-wide online sales tax for online retailers – the revenues of which would be used to reduce the trade rates of in-store retailers in England .
Raising taxes for Amazon, Asos, and eBay might sound good in theory, but could it increase the prices you see online and in stores?
Read on to find out how a new online sales tax could change the amount you pay at checkout.
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What is online sales tax?
Despite an explosion in online shopping since Covid, online-only retailers currently pay lower commercial rates than brick-and-mortar stores.
To level the playing field, the government is considering an online sales tax to counter the imbalance in the tax burden between online and in-store retailers.
Dubbed the “Amazon tax,” it could see the big online retail giants like Amazon, Asos and eBay paying higher taxes.
A 2% levy on online orders has already been proposed, with the aim of raising £ 2 billion each year and further aligning the tax obligations of online retailers with those of physical stores.
These revenues could even allow the government to lower trade tariffs for retailers owning properties in England, stemming the tide of mainstreet closures.
Advocates for the tax argue it could help protect main streets from yet another collapse following a string of retailers falling under administration during the pandemic.
But critics such as the British Retail Consortium objected, arguing that high street retailers with online operations would also be affected.
The government continues to explore the arguments for and against the Internet shopping tax and will be releasing a consultation shortly.
What impact could this have on online and in-store prices?
An increase in the tax could lead online retailers to increase their prices.
Online retailers with slim margins could be forced to pass the additional costs on to consumers, which could cause your online orders to cost more than before.
That said, online retailers who can afford it will likely want to keep prices as competitive as possible.
There are arguments that the tax could also affect store prices.
High street stores are currently limited to what they can charge due to competitive online pricing.
But if online stores start charging more, there’s nothing stopping in-store retailers from raising their prices to reflect online ads.
There are no concrete answers yet on how the tax works or if it will happen at all – we may have to wait for the Spring 2022 budget to find out more.
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