Chancellor to delay decision on UK online sales tax

Sunak wants to wait until president Joe Biden decides on whether the US will support global efforts to reform digital tax rules being led by the Paris-based Organisation for Economic Co-operation and Development (OECD), according to the Financial Times. 

The chancellor is set to publish a range of different tax consultations along with a summary of responses to his review on the future of business rates. 

Retail businesses are divided about how effective a straight online tax would actually prove to be, given many high street retailers also trade online. Most retailers would instead advocate for a straight reduction in business rates. 

Sunak is set to delay any decisions until the autumn and will take cues from US treasury secretary Janet Yellen, with the G7 summit in June being seen as a key moment. 

The UK introduced a limited digital services tax in April 2020, which was the brainchild of former chancellor Philip Hammond and is expected to raise £500m by the end of the Parliament. 

By comparison, a levy of 2% on all goods purchased online could raise in excess of £2bn a year for the government’s coffers. By comparison, business rates are currently worth some £30bn. 

The OECD is attempting to lead on efforts to modernise the international tax system by introducing a global minimum corporation tax rate and enabling countries to tax companies’ profits based on where their customers are, not where sales are made. 

This would mostly hit US technology giants and European luxury goods brands.