UK online sales tax would be a barrier to entrepreneurship

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With a budget due on the 3rd of March, concerns are high that a UK online sales tax, often dubbed an ‘Amazon Tax’, will be introduced. Two things to consider, with the pandemic still in full swing it’s unlikely to come this March and more probable in the Autumn, and it almost certainly won’t bother Amazon that much as over 55% of everything they sell is from a third party merchant and Amazon will simply pass the tax on to small businesses.

Amazon has form for passing on tax, in August last year they instantly hiked fees by 2% passing on the Digital Services Tax to UK small businesses. If anyone thinks that a UK online sales tax would be any different then they’re probably looking through rose tinted spectacles.

There is a fundamental problem in that Business Rates are excessively high for bricks and mortar retailers compared to online. That’s because they reside in expensive High Streets rather than lower rateable properties out of town. The second problem is that so much of the High Street has gone bust that the revenues are plummeting anyway. The raft of charity shops that have replaced regular retailers don’t help as they are entitled to an automatic 80% relief from non-domestic rates.

“We want to see thriving high streets, which is why we’ve spent tens of billions of pounds supporting shops throughout the pandemic and are supporting town centres through the changes online shopping brings.

“Our business rates review call for evidence included questions on whether we should shift the balance between online and physical shops by introducing an online sales tax. We’re considering responses now.”
– Treasury spokesman

Somehow the chancellor has to plug the gap in the nations finances and put a plan into place to start paying down the pandemic billions that have been liberally been flooded to support people and businesses. A UK online sales tax is an attractive way to start plugging the hole in the finances and self employed merchants trading online could face a double hit.

The self employed knowingly accepted their status as not having the security of employment benefits but when the pandemic hit, many long term self employed had SEISS grants bestowed upon them by the chancellor. It’s likely that tax revenues from the self employed will be examined as payback for bailing out their non-benefit status. This will naturally apply to all, those who didn’t need to claim as well as those who were ineligible, and so if you’re a self employed online merchant you could be looking at a hit on your profits from a UK online sales tax and then on the back end when you pay your personal taxes.

Many of the high street retailers calling for an online sales tax could end up paying it themselves as many of those that have traded in the past year have done so online. It would be ironic to see them pay less in Business Rates and end up being stung even more for their online sales. But the reality is that no one knows quite how it would work – would it apply to certain massive enterprises like Amazon, would it also apply to other marketplaces such as eBay, OnBuy and Notonthehighstreet, who don’t sell anything so in effect it would again be imposed on small businesses? Cas Paton of OnBuy certainly sees it as a danger which will impact online retail’s ability to grow.

“As we approach the budget, an online sales tax would be a huge mistake from Chancellor, Rishi Sunak. While it’s been nicknamed the ‘Amazon Tax’, the reality is that it won’t impact the big players in the market but will stifle the growth of so many independent British retailers which have relied on online sales as a lifeline over the past twelve months.
In the past few years, headway has been made in growing Britain’s own ecommerce industry. We’re gaining traction in developing a retail ecosystem that works for retailers and customers, that protects and supports small businesses and encourages people into bricks and mortar stores. An online sales tax will only damage this developing UK industry before it really gets off the ground and that concerns me for the sector.
As an online marketplace, we’ll of course feel the impact of this type of tax, but I am far more concerned about the millions of entrepreneurs and SMEs across the country. Over 6,000 independent British retailers sell on OnBuy and it is those business owners that will take the hit. It won’t touch the sides when it comes to the big corporates.
I think the Chancellor could be playing a dangerous game. A tax like this only increases the barriers to entrepreneurship, something the country could certainly do without in the wake of Brexit and given the state of the economy coming out of the pandemic. Restricted growth in the short term will do nothing to benefit our country or enable the growth of the British ecommerce industry that is starting to take hold. We need to protect small businesses at all costs and an online sales tax is not the way to do it.”

– Cas Paton, CEO and founder, OnBuy

7 Responses

  1. A tax for online is coming at some point in the near future, think they are just working out the best way to do it as it is not a one size fits all as each industry is different.

    If having a window was taxed at one point in history, you can bet government will tax online selling soon.

  2. And there lies the problem. Yes it will generate cash, but at the expense of the little guy not the big companies that are the real issue.
    the small independant company employing 5 people is not crashing the high street, the likes of Amazon are. So why go after the little guy? Sadly this has always been the case when after extra money, the little guys are easy prey and makes it look like the system is working.
    I don’t disagree that a fairer tax system is needed, but a blunt instrument like a internet tax is not the answer, atleast not without safe guards. Maybe there could be a point at which it is paid? Or even an increasing scale, so that the littloe guy pays little and the giants pay alot more?
    Meanwhile, i doubt very much whether it will actually save the high street anyway. Councils seeing carparking as a cash cow is a big barrier. Shops having to still pay massive rents. The convenience of being able to do all your shopping from home, with no travelling and no worries about traffic and poor weather, let alone being able to see who has stuff in stock and who is the cheapest in a matter of minutes.
    I believe that the demise of the highstreet as we know it is here to stay. It is destined to become over priced coffee shops, nail bars and charity shops that make little money and pay little back in the form of rates and paid employment.
    Maybe we should be looking to completely reinvent the high street? After all when we came up with the car, we didn’t decide to just try and bling up the horse!

  3. If it’s a case for levelling out Business Rates, then increase the Business Rate for
    all warehousing who are instrumental for the part they are playing in the increase in online sales.

    I’m saying all warehouses, but do Business Rates differ for Retail / warehouse/ light industrial together or separately?

    Maybe that should be looked at?

    High street charity shops should also have their share of Business Rates increased. Just because they are charities does not mean everyone works for nothing. Take a look at the salaries and perks afforded to the CEO’s of such. If they can afford that then, surely they are not that poor so as not to pay a fair share of Business Rates, considering some charity shops have taken prime high street spots.

    But, I ask, how does an online seller recoup sales taxes paid on returned items for refund, non arrival etc? If they sell through an OMP, it’s the selling platform’s duty, but if not, paperwork ( and software) will not only increase but prove costly and time consuming.

  4. the traditional high st ,is a thing of the past
    like farm produce and animals in every village market square once was
    throwing money at it, is a waste

  5. The small independent will pay as normal. The large multi national serial tax avoidance companies like Amazon and eBay will continue to avoid paying into the countries they have profited so much from over the last 10 years.
    We all know what the problem is, and Amazon have cost a lot more “real” jobs ” with their tactics over the years, because they have been allowed to by blind Political idiots who never think ahead.
    Plus the self employment grant was a drop in the Ocean compared to Furlough and the self employed have always been easy targets for the Tories, who have also destroyed so much of our EU trade which to me is a bigger hit.

  6. This isn’t about “protecting” the high street, but raising taxes.

    They could have protected the high street at any time in the last decade but just ignored the problem.

    Now everything is going online, they’re going to tax that instead to fill the hole.

    Same will happen with electric cars.

    Once fuel duty dries up, you won’t see any more tax incentives to go green.

    On the contrary, you will see road tax for electric vehicles go up by a couple of grand a year.

    As soon as he can, Sunak is going to tax the hell out of small business, whilst leaving the corporates largely untouched.

    The idea this creates jobs is b*ll*cks. It goes down shareholders throats and corporates shed jobs like shelling peas to max out bonuses and payouts.

    Customers will kick up when they find everything goes up by X% because of online tax, not to mention brexit costs. But hey, you got what you voted for lol

    But at least it will be a “world beating” online tax, probably the highest in the world.


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