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Government Launches Online Sales Tax Consultation

The government has launched a consultation to determine whether the United Kingdom should implement a sales tax for online goods, a decision that could have huge ramifications for retailers and commercial retail maintenance.

This early-stage consultation, which runs from late February to late May 2022, aims to help the high street sector by funding business rate reductions for physical retail stores through more heavily taxing online sales.

This was a commitment the government made during its Autumn Budget as part of a review of business rates in general, as the retail sector began its road to recovery.

It has, however, stressed that no decision has been made on this matter as of yet, and several more consultation stages will be conducted before any decision is made.

The consultation will look at every aspect of a potential sales tax, including the types of products that would be considered to be in scope and the nature of the tax itself, which could affect retail groups in different ways considering that nearly every retailer has some form of eCommerce.

The main decision would be whether the fee would be a flat rate based on the numbers of deliveries or transactions, or a tax on the revenues made from online deliveries, with both affecting some online retailers more than others.

This aspect of the consultation also looks into its effect on businesses and consumers, and determining whether the additional tax would incentivise people to shop on the high street more or simply to shop less, in general, will be the determining factor to whether such a tax goes into effect.

There are some complex aspects to bringing in an online tax, such as how click-and-collect, which is for all intents and purposes an omnichannel system, should be taxed, how tax can be collected for non-residents, whether its complexity and cost actually generates revenue and the risk that the tax will simply be passed to consumers.

The hope is that these questions will be clarified by the closing of the early-stage consultation on 20th May.