According to the Financial Times, UK government officials have revealed that Chancellor of the Exchequer Rishi Sunak will not make a decision on a prospective online sales tax until the autumn. 

The newspaper indicated that Mr Sunak was apparently waiting to see whether President Joe Biden’s administration in the United States would signal support for efforts to reform international digital tax rules being led by the OECD organisation in Paris. 

The Chancellor is set to publish a range of tax consultations on Tuesday 23rd March, in addition to a summary of responses to a review of the future of business rates. 

The FT said Mr Sunak was contemplating whether to alter the commercial property levy at the same time as bringing in a tax on sales made online. 

“The US has shown some movement on this already” 

Any new online sales tax would doubtless have profound implications for businesses around the country that sell all or some of their goods online, including many making use of TS Partners’ expertise in digital accountancy in Plymouth and Wellington. 

As the FT also observed, there remains considerable differences in opinion among businesses on whether an online sales tax should be introduced. 

This is partly due to even many brick-and-mortar stores selling at least some products online, especially since the onset of the pandemic. Unsurprisingly, then, many high-street retailers would prefer a straightforward business rates reduction. 

However, officials were cited by the newspaper as saying that the Chancellor would hold off on any decision on an online sales tax, as well as the outcome of a review into business rates launched in July last year, until the autumn. 

Mr Sunak is reportedly keen to see what stance US Treasury secretary Janet Yellen will take on a global approach to the taxation of digital services. In the words of the FT, “the G7 summit in Cornwall in June is seen as a key moment.” 

The newspaper also quoted a UK Treasury official as saying: “The US has shown some movement on this already, so we want to give it a bit more time.” 

Hasn’t the UK already introduced a tax on digital firms? 

The prospect of a possible new online sales tax on businesses selling on the web should not be confused with the digital services tax that has already been in effect in the UK since April 2020. 

The digital services tax, however, chiefly targeted large multinationals, and is expected to generate around £500 million by the end of the Parliament. By contrast, many more companies would be directly affected by an online sales tax; if a 2% levy was imposed on goods purchased online, it is thought that this could raise about £2 billion a year. 

Business rates, meanwhile, continue to be a crucial revenue source for the government, bringing in around £30 billion. 

Nonetheless, it is expected that when the Treasury publishes responses to its business rates review, it will be shown that many retailers would like to see a reduction in their rates bill, instead of a new tax on online sales. 

Tej Parikh, chief economist at the Institute of Directors (IoD), warned that the coronavirus crisis had “only reiterated the distorted playing field between online retailers and bricks and mortar”. He added: “It is crucial the government finds a way to alleviate the burden of sky-high rates on our high street, while being careful not to undermine digital growth.” 

Could you benefit from the knowhow and experience of our online accountants? 

Here at TS Partners, we will continue to keep you updated on the latest developments in relation to any online sales tax or changes to business rates that may emerge. 

In the meantime, please remember that our experts are always available to help you in relation to all manner of digital accountancy in Plymouth and Wellington. 

Simply browse our website now to discover more about the depth and breadth of our tax and accounting services, or contact us directly for further information and advice.