Government pledges 2% tax on online retail

In answers to questions on the Future High Streets Fund in the House of Commons last week, Jake Berry, the parliamentary under-secretary of state for housing, communities and local government, said that the government would bring forward its own 2% tax on online retail announced at the last Budget, if an international agreement on the issue couldn’t be reached.

Berry said: “The government have been clear that online taxation in retail needs to be done as part of an international agreement, but we have also been clear that, if we cannot get such an agreement, we will come forward with our own 2% tax on online retail to ensure that we can continue, as we did in the last Budget, to give relief to those retailing on our high streets.”

The announcement comes nearly a month after the publication of a report calling for an online tax to “level the playing field” for high street retailers by the Housing, Communities and Local Government Committee. 

At the autumn Budget, chancellor Philip Hammond announced a Digital Services Tax – under which online marketplaces would pay a 2% platform fee on revenue earned in the UK, not from payments directly from consumers. However, the initial announcement did not directly target online retailers. 

The proposed tax was dubbed the ‘Amazon Tax’, highlighting the effect the etail giant has had on the UK’s retail landscape. 

Berry was responding to a question from Lib Dem MP Tim Farron, who described the 2% tax as “puny” and said his party would “support higher taxes on tax-dodgers”.

He added that the 2% figure “on mega online firms that avoid paying their fair share” was “an insult to shops on the high street”. 

Hammond is set to deliver the government’s spring Statement on Wednesday, following a mooted final vote on its proposed Brexit deal on Tuesday. 

Head of UK business rates at Altus Group Robert Hayton said: “Traditional bricks and mortar retailing is obviously property intensive with the reliance on property leading to a larger tax to turnover ratio compared with online only” adding that “traditional retail accounts for £17.12 billion of the overall £66.55 billion rateable value for all sectors in England and Wales which forms the basis of how business rates bills are calculated.”