UK mulls 2% ecommerce sales tax and delivery tax
- Jul 27, 2020 | Richard Asquith
The UK Treasury is considering imposing a 2% sales tax on online ecommerce to raise £2 billion. This would be payable by the seller in addition to 20% standard VAT rate levied on the customer. This levy be to help level the playing field for traditional high-street retailers who face higher physical costs and Business Rates.
2% online seller tax
In a call for evidence last week the Treasury sought industry views on a potential online sales tax for e-commerce retailers to help physical stores compete. The 2% ecommerce seller tax would target B2C sales to UK consumers made in direct competition to sales by physical retailers. It is therefore likely to target goods, and not tax digital services.
There remain many issues of detail to consider. Most UK sales are by mid or small retailers even on the large marketplaces. Thousands of sellers are below the UK VAT registration threshold, so policing any new tax would not be simple.
The online retail tax would be similar to the UK Digital Services Tax, a 2% levy on turnover by global digital media groups providing advertising and data services.
There could also be a delivery tax to reduce traffic and pollution. This may be chargeable by the seller or delivery agent.
This is in addition to the UK's Department for Transport position statement for a mandatory delivery charge on ecommerce sales. This has similar aims to plastic bag taxes: nudge consumer behaviour towards more environmentally friendly behaviours such as reducing buy and returns, or encouraging more efficient bundling of multiple purchases.
Business Rates reforms
The consultation also considers a review of the Business Rates regime which may distort the market in favour of online sellers. As an alternative, the Treasury is suggesting a capital values tax, moving the tax liability from the tenant to the landlord
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