Tax

Chancellor mulls online sales tax

Chancellor Rishi Sunak is reportedly mulling an online sales tax, in a bid to support bricks-and-mortar stores through the pandemic.

According to The Times, it comes amid concerns that business rates are hampering high street retailers, as online businesses did not need “high-value” rented properties.

The online sales tax would also provide a “sustainable and meaningful revenue source for the government”.

Additionally, in March of this year, the UK Government confirmed plans to introduce a new 2% tax on the revenues of online marketplaces which “derive value from UK users”.

This came into effect in April, and applies to search engines and social media services, and these businesses will be liable to the tax when its worldwide revenues from digital activities is more than £500m and more than £25m if revenues are derived from UK users.

HMRC said the application of the current corporate tax rules to businesses operating in the digital economy has led to a “misalignment” between the place where profits are taxed and the place where value is created.

It added that the measure will “ensure” the large multinational businesses in-scope make a “fair contribution to supporting vital public services”, and believes it will add as much £515m in additional annual income by the end 2025.

HMRC said at the time: “The government still believes the most sustainable long-term solution to the tax challenges arising from digitalisation is reform of the international corporate tax rules and strongly supports G7, G20 and OECD discussions on long-term reform.

“The government is committed to dis-applying the Digital Services Tax once an appropriate international solution is in place.”

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