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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.

Delivery Tax

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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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He can be contacted at: richard.asquith@avalara.com. He is part of the European leadership team which won International Tax Review's 2019 Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.
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