The Treasury’s Business
rates review sets out two potential alternatives which could, in
principle, replace the current system of business rates.
The government is seeking evidence on the potential risks and
benefits of introducing an online sales tax which, given the increase in online
retail sales (accelerated by coronavirus), it says could ‘provide a sustainable
and meaningful revenue source for the government’ even though it might not
replace business rates entirely.
Rather than the current system of tax based on the rental value
of non-domestic property which arguably imposes an unreasonable burden on
traditional retail businesses in comparison to online retailers, the proposal
would seek to level the playing field by levying a tax on companies based on
their online sales. The government’s consultation paper itself notes that may
retailers are already opposed to such a tax – on grounds that it would increase
costs for consumers, make the transition to online more difficult for offline
retailers, distort the market and penalise more efficient, innovative
businesses.
The consultation asks which services and goods should be
subject to an online sales tax, what the effects of its introduction would be
on, for example, consumer behaviour and prices, and how such a proposal might
affect the distribution of taxation.
RSM reports that a 2% levy on sales of online goods would raise
around £2bn a year for the Treasury, and would ‘apply fiscal pressure to shift
consumers away from online spending’, accompanied by a mandatory charge for
consumer deliveries. The firm notes that the levy could have the reverse effect
of dampening enthusiasm for tech and ecommerce entrepreneurialism in the UK,
along with simply resulting in consumers spending less money.
Adam Harper, Director of Strategy and Professional Standards at
the AAT comments that, set against the government’s need to address the current
economic challenges, ‘exploring the options for taxing online shopping as a
potential replacement for business rates seems appropriate’. The AAT also calls
for online marketplaces to be liable for the collection and remittance of VAT
as one way to increase compliance and provide more balanced treatment of online
and offline small businesses (a number of measures have already been
introduced, for example to make the online marketplace jointly and severally
liable for VAT where the seller fails to comply with a requirement of UK VAT
law).
The consultation also considers an alternative capital values
tax based on the current combined capital value of the land and the property, with
liability falling on the owner rather than on the occupant of the property.
This raises a number of questions including how to ascertain current capital
value and how to ensure compliance where the owner is located outside the UK.
Reponses on the business rates ‘alternatives’ section of the
review are invited by 31 October 2020.
The Treasury’s Business
rates review sets out two potential alternatives which could, in
principle, replace the current system of business rates.
The government is seeking evidence on the potential risks and
benefits of introducing an online sales tax which, given the increase in online
retail sales (accelerated by coronavirus), it says could ‘provide a sustainable
and meaningful revenue source for the government’ even though it might not
replace business rates entirely.
Rather than the current system of tax based on the rental value
of non-domestic property which arguably imposes an unreasonable burden on
traditional retail businesses in comparison to online retailers, the proposal
would seek to level the playing field by levying a tax on companies based on
their online sales. The government’s consultation paper itself notes that may
retailers are already opposed to such a tax – on grounds that it would increase
costs for consumers, make the transition to online more difficult for offline
retailers, distort the market and penalise more efficient, innovative
businesses.
The consultation asks which services and goods should be
subject to an online sales tax, what the effects of its introduction would be
on, for example, consumer behaviour and prices, and how such a proposal might
affect the distribution of taxation.
RSM reports that a 2% levy on sales of online goods would raise
around £2bn a year for the Treasury, and would ‘apply fiscal pressure to shift
consumers away from online spending’, accompanied by a mandatory charge for
consumer deliveries. The firm notes that the levy could have the reverse effect
of dampening enthusiasm for tech and ecommerce entrepreneurialism in the UK,
along with simply resulting in consumers spending less money.
Adam Harper, Director of Strategy and Professional Standards at
the AAT comments that, set against the government’s need to address the current
economic challenges, ‘exploring the options for taxing online shopping as a
potential replacement for business rates seems appropriate’. The AAT also calls
for online marketplaces to be liable for the collection and remittance of VAT
as one way to increase compliance and provide more balanced treatment of online
and offline small businesses (a number of measures have already been
introduced, for example to make the online marketplace jointly and severally
liable for VAT where the seller fails to comply with a requirement of UK VAT
law).
The consultation also considers an alternative capital values
tax based on the current combined capital value of the land and the property, with
liability falling on the owner rather than on the occupant of the property.
This raises a number of questions including how to ascertain current capital
value and how to ensure compliance where the owner is located outside the UK.
Reponses on the business rates ‘alternatives’ section of the
review are invited by 31 October 2020.
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