eBay's UK boss has warned that the Government must ensure small British businesses are not "unfairly" penalised if it reforms how tax is collected on online marketplaces. Chancellor John Healey is reportedly planning to announce changes in his upcoming Budget that would make online platforms responsible for collecting VAT owed by all retailers selling on their sites.
Currently, online marketplaces must collect VAT on sales made by overseas businesses to UK customers, but some foreign firms are said to use shell companies to bypass this rule. Under the proposed changes, platforms would collect VAT for all retailers with an annual turnover above £90,000, regardless of where they are based, according to widespread reports. The move is expected to raise up to £1 billion and help reduce business rates for physical stores on UK high streets.
Protecting small businesses
Eve Williams, vice-president and general manager at eBay UK, said it was crucial to ensure any tax change would "definitely" protect small UK businesses. She told the Press Association news agency: "We strongly support that we ensure overseas sellers meet their legal and tax obligations, because I want to make sure our domestic sellers in the UK get the fairest chance to succeed as well, and that any of these tax changes that are coming in definitely protect small UK businesses."
Williams said eBay had held discussions with the Treasury on how to protect growth and ensure small businesses were not "unfairly" affected by any tax crackdown. She continued: "Often, it is those really tight kinds of thresholds that inhibit people's growth and so thresholds around things like VAT, around national insurance for employees, that are the things that actually stop growth."
"And so what we've been talking to the Government about and the Chancellor is how do we make sure that everything we're looking at, and any online sales taxes that might come in place and any new rules… are there things that could hinder small businesses and how do we make sure nothing that comes into place are things that could put people off?" She added: "We want to make sure we're just continuing to see growth."
eBay report highlights regional imbalances
Williams added: "The Chancellor's got a big challenge ahead to make sure they are taxing the right things, to make sure they've got the investment in place." A report published by eBay highlights how the potential of small businesses was held back by "persistent productivity gaps and stark regional imbalances". The research found that 31 of the 40 areas with the highest concentrations of eBay small business activity in the UK had a gross domestic product (GDP) per head below the national average.
Williams told PA the findings showed online entrepreneurship was developing beyond expected economic hotspots, with "hidden" high streets and businesses that could grow further if they had the confidence and resources. She said this could be addressed by placing small businesses' growth at the heart of the Government's economic strategy and raising awareness of the benefits of entrepreneurship.
She suggested measures including increasing the trading allowance and supporting low-value imports into the European Union could help support small businesses' growth. The trading allowance is a UK tax exemption that allows individuals to earn up to £1,000 per tax year from self-employment, casual services such as baby-sitting, or hiring out personal equipment tax-free. Williams said the allowance should be increased to £3,000 to "make it easier for people to test their business ideas and start earning money".
Ahead of the Budget on October 28, the report called on ministers and regional mayors to put small online businesses at the centre of local growth plans, to attract new investment and help existing small enterprises develop.
