Chancellor Rishi Sunak is reportedly considering an online sales tax to raise £2bn a year. Industry experts offer their views on whether this mooted move could level the playing field between digital and high street businesses.

Rob hattrell

Rob Hattrell, vice-president, eBay UK

My view is no, it wouldn’t. I think the system of tax, rents and rates needs evolution to be fit for purpose for a modern digital economy. But the way that a digital sales tax has been described I don’t think is a helpful initiative.

This notion that online and offline exist disparately is just not correct. Two-thirds of the businesses that trade on eBay have a physical premises, so the notion that these two channels are disparate is not helpful.

There are plenty of businesses that started online and went and opened up shops, so there’s a way that the value flows back on to the high street as well. 

Most importantly, and in the spirit of everything I’ve just described, we have 300,000 small businesses and another 50,000 or 60,000 coming online during the pandemic trying to create entrepreneurial opportunity. We’re looking ahead, as a nation, to a post-pandemic and post-Brexit world, and how to rebuild an economy. 

To effectively tax small businesses and the entrepreneurs and creative businesses that are trying to do that at the forefront of the digital economy is not putting the emphasis in the right places.

We can’t reverse back to what the high street was like, but imagine what the high street could be like in the future. I think that looks very different – it’s much more community-centred, it’s powered by small enterprise, creative businesses, more local operators. Those are the aspects we need to think about.

So I’d encourage a debate that is much more progressive and thinks about how you connect it all, rather than this ‘one-plays-the-other’ game. 

Neil Saunders

Neil Saunders

Neil Saunders, managing director, GlobalData Retail

Yes, business rates need replacing. Yes, high streets need support. However, the introduction of an online sales tax is not a solution to either challenge.

Consumers shop seamlessly across channels, so having different price points online and in stores is confusing. Retailers could circumvent this by harmonising prices and paying the differential rate of tax depending on the selling channel.

But that either means consumers will pay more across the board if retailers round up prices or that margins will take a hit if retailers round them down. Neither is desirable.

Seamless channel shopping also means an online tax makes little sense. A customer that buys online and collects in a store isn’t deserting a high street.

And a customer that can’t find the right size garment in a shop and orders online should not be punished with a higher price. The tax system needs to reflect our omnichannel world.

Then there’s the complexity! The tax system is challenging enough already without the need of yet more layers.

Besides, will a 2% online tax even be enough to push more people back to the high street? Probably not. And that becomes the perfect justification for future increases in the levy.

Milan Pandya

Milan Pandya, business advisory partner, Blick Rothenberg

Rather than taxing consumers through the back door – which is the likely outcome of the government’s suggested levy on online sales and a charge on online consumer deliveries to curb traffic and pollution – the Treasury should raise the rate of corporation tax for all retailers, not just those operating online.  

This tax is payable on profits and not revenues and thus provides a means of allowing all retailers, regardless of their business model, to be fairly treated.

While the government has stated that an online tax may be part of the solution to generate adequate and sustainable taxes as it looks to potentially reduce business rates in a further attempt to support the high street, care must be taken to ensure that any changes announced are fair on all businesses and consumers, who ultimately may end up having to suffer higher prices for online shopping. The suggested levy is not.

While no one would disagree with the need to find sustainable solutions to support the high street – and reducing retailers’ fixed costs by cutting business rates does this – one should not overlook the fact that online retailers also have certain fixed and semi-fixed costs.

While property costs, including business rates, may be lower than many high street retailers’, an online business needs to invest heavily in stockholding, fulfilment procedures, digitalisation and people.