HMRC has launched a consultation to gather evidence and inform government policy on the proposal for an online sales tax (OST) as a means to rebalance the taxation of the retail sector between online and in-store, using the revenue raised from online to fund a reduction in business rates for retail properties. The consultation will run until 20 May 2022.
The consultation seeks views on the design of a potential OST, posing a number of practical questions:
Which goods and services would be within the scope of the tax?
How would ‘online sales’ be defined, and should the definition extend to ‘remote’ sales made by phone or post?
Would any exemptions be appropriate, such as for click-and-collect purchases or for particular goods and services?
At what point in the transaction would an OST be levied, and what would be the role of intermediaries such as marketplaces?
What would be the territorial scope of an OST and how would cross-border sales be treated?
Would a threshold or allowance be appropriate to account for smaller firms or those with a lower proportion of sales made online?
How would an OST be reported to tax authorities and what would the payment schedule be (and what data and systems would be required)?
Commenting on the consultation, the CIOT has cautioned that the effect of the new tax could effectively transfer the burden of business rates from commercial landlords on to consumers via higher prices.
Although the UK government has not yet committed to proceed with the introduction of the tax and is instead consulting – an approach welcomed by the CIOT – John Cullinane, CIOT director of public policy, noted that ‘this would be the 22nd new tax of the 21st century … It is not exactly a triumph for tax simplification that so far this century we have added 21 new taxes to the statute book without getting rid of a single one!’.
Cullinane also questioned whether existing taxes could instead be used to address the problem: ‘An increase to VAT would also be borne by the consumer, just as an online sales tax would be, but it would be less burdensome in the sense one tax is simpler than two. It would also be less distortive of customer preferences between online and physical purchases.’
HMRC has launched a consultation to gather evidence and inform government policy on the proposal for an online sales tax (OST) as a means to rebalance the taxation of the retail sector between online and in-store, using the revenue raised from online to fund a reduction in business rates for retail properties. The consultation will run until 20 May 2022.
The consultation seeks views on the design of a potential OST, posing a number of practical questions:
Which goods and services would be within the scope of the tax?
How would ‘online sales’ be defined, and should the definition extend to ‘remote’ sales made by phone or post?
Would any exemptions be appropriate, such as for click-and-collect purchases or for particular goods and services?
At what point in the transaction would an OST be levied, and what would be the role of intermediaries such as marketplaces?
What would be the territorial scope of an OST and how would cross-border sales be treated?
Would a threshold or allowance be appropriate to account for smaller firms or those with a lower proportion of sales made online?
How would an OST be reported to tax authorities and what would the payment schedule be (and what data and systems would be required)?
Commenting on the consultation, the CIOT has cautioned that the effect of the new tax could effectively transfer the burden of business rates from commercial landlords on to consumers via higher prices.
Although the UK government has not yet committed to proceed with the introduction of the tax and is instead consulting – an approach welcomed by the CIOT – John Cullinane, CIOT director of public policy, noted that ‘this would be the 22nd new tax of the 21st century … It is not exactly a triumph for tax simplification that so far this century we have added 21 new taxes to the statute book without getting rid of a single one!’.
Cullinane also questioned whether existing taxes could instead be used to address the problem: ‘An increase to VAT would also be borne by the consumer, just as an online sales tax would be, but it would be less burdensome in the sense one tax is simpler than two. It would also be less distortive of customer preferences between online and physical purchases.’
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