Chancellor John Healey has been urged by the Institute for Public Policy Research (IPPR) to introduce a 2 per cent tax on online sales to support bricks and mortar businesses on the UK’s high streets. The think tank has also called for a 1 per cent tax on click and collect services in its latest report ahead of the Budget this month.
An estimated £1.5 billion could be raised as a result of the changes, with the money put towards a reduction in business rates for leisure, hospitality and retail shops.
Shifting the tax burden from bricks to clicks
Aditi Sriram, an economist at the IPPR, urged the Government to “shift some of the tax burden from bricks to clicks”, arguing that online retailers do not face the same barriers as traditional high street businesses.
The think tank, which has previously been linked to the Labour Party, said the first £500,000 of a business’s annual remote sales would be exempt from the tax to protect smaller retailers. Small businesses could be £1,400 better off a year, and larger firms around £2,500, the IPPR said, with local authorities “fully compensated” for the lost business rates revenue.
Business rates reduction proposed
Mr Healey is preparing to deliver the Government’s financial statement on October 28. The IPPR has also proposed a decrease in the retail, hospitality and leisure business rates multipliers in England, which are currently 38.2p for small properties and 43p for standard ones. As a result of the proposed online sales tax, these would be reduced to 28.2p and 41p respectively.
Mr Sriram, author of the IPPR report, said: “Britain’s tax system was built for an era when the location where you did business was closely linked to how much business you did. That is no longer the case. As people have moved their shopping online, high street shops and restaurants continue to face large, fixed tax bills simply because they need physical premises.”
He added: “The Government should shift some of the tax burden from bricks to clicks and use the money to cut bills for the businesses that bring people onto our high streets. Online shopping is here to stay. The question is whether the tax system catches up with the economy we now have.”
Prime Minister Andy Burnham unveiled a £210 million package aimed at regenerating communities last month, pledging to “restore pride and bring hope back” to high streets by revamping vacant shopping centres, disused cinemas and abandoned local eyesores across England.
