Why Is an Online Sales Tax a Bad Idea?

Article by Tamia Bangura

Earlier this year, the government published a consultation document on a potential online sales tax. In the document, it was made clear that they wish to introduce the tax ‘as a means to rebalance the taxation of the retail sector between online and in-store retail.’

Since the document was published, opinions about the prospective plans to introduce an online sales tax have been divided. A meeting on Wednesday was held with Lucy Frazer, the Treasury minister, to discuss the government’s plans for an online sales tax. Well-known names such as Amazon, Asda, Asos, JustEat and Curry’s, were present at the meeting. At the meeting, John Boumphrey (Amazon’s UK country manager) mentioned that the online tax would negatively impact the small and medium-sized enterprises (SMEs) that do business on Amazon. eBay also shared the view that SMEs would not benefit from the introduction of this new tax.

Another argument which has been put forward against the introduction of the online tax has been that consumers are currently suffering enough as it is. This is mainly due to the rising fuel and energy costs, inflation, the rising cost of living, and National Insurance (NI) increases. Although the online tax is set to be imposed on sellers, according to a poll published by Public First, it is expected that 83% of businesses will pass its cost onto their consumers. Alex Baldock, the chief executive of Currys, has also agreed that the online tax will place more pressure on consumers. Mr Baldock said it is not the time ‘to put up taxes on retail, increasing the burden on an already overtaxed industry….’

Eleven businesses, including AO.com, Gymshark and Ocado, wrote a letter to Chancellor Rishi Sunak with reasons to reject an online sales tax. They argued that the online tax is ultimately a shopping tax and will only increase the cost of living. It was further suggested that those on lower incomes would suffer the most.

Steve Rowe, Marks & Spencer’s chief executive, has shared his discontent with the potential online tax. He made a statement in The Mail and said, ‘you cannot tax people back to shops.’ This suggests that he believes an online sales tax will drive more people into stores and, in turn, impact e-commerce businesses.

Overall, there are many businesses and individuals who reject the idea of an online sales tax. There is currently a lot going on with the economy, and the government should be urged to take extra care and not worsen the situation.