UK Government plans sales tax to increase the cost of online shopping

A new sales tax is being considered in the UK which could increase online shopping and home delivery costs.

Chancellor Rishi Sunak said a so-called “online sales tax” could help make up for the billions lost during the pandemic by both the Government and the struggling high street.

The tax would run alongside the existing business rates tax system, where retailers pay taxes based on the so-called “rateable value” – essentially the rental value – of their property.

The current system has been criticised as it favours online retailers that aren’t faced with expensive rent bills.

In a call for evidence published this week, the Treasury said an increase in online shopping due to Covid-19 could mean taxing online sales provides a “sustainable and meaningful revenue source”, the Mirror reports.

It’s believed the online tax could also help drive shoppers back to the high street, giving retailers a boost alongside other schemes such as the VAT cut and Eat out to Help Out scheme which launches next week.

According to The Times, the tax would be around the 2% mark and that it could raise £2 billion a year for the Treasury.

It added that the government is also considering a mandatory charge on online deliveries that could mean higher prices and increased costs for online shoppers.

The Treasury Select Committee recommended the introduction of an online sales tax in a report back in October last year.

At the time, it said a shake-up of the “broken” system was needed to prevent the decline of the high street.

Consumers and businesses now have until October 31 to give their input on the idea, before the Treasury sets out its initial findings this autumn. A final decision is planned in spring 2021.

You can respond to the call for evidence by completing an online survey here.

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