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Online retail set for Digital Service Tax

A promise has been made by Jake Berry, the parliamentary under-secretary of state for housing, communities and local government, to extend the Digital Services Tax to include a 2% charge on online retail.

Answering questions on the Future High Streets Fund in the House of Commons last week, Berry pledged that the government would bring forward its own 2% tax on online retail announced at the last Budget, if an international agreement on the issue couldn’t be reached.

“The government have been clear that online taxation in retail needs to be done as part of an international agreement, but we have also been clear that, if we cannot get such an agreement, we will come forward with our own 2% tax on online retail to ensure that we can continue, as we did in the last Budget, to give relief to those retailing on our high streets,” sad Berry.

The announcement comes just after a month after the publication of a report which called for an online tax to “level the playing field” for high street retailers by the Housing, Communities and Local Government Committee. 

During the autumn Budget, Philip Hammond proposed plans for a Digital Services Tax, effectively known as the ‘Amazon Tax,’ revealing to some extent the grip the etail giant has on the UK’s retail sector.

However, Lib Deg MP Tim Farron described the tax as “puny” and that it was “an insult to shops on the high street.” Farron also added that the Lib Dems would “support higher taxes on tax-dodgers.”

BRC welcomes Chancellor’s stance on online retail taxation

The British Retail Consortium has given the thumbs up to Chancellor Philip Hammond’s stance on tax for online retailers, in addition to its view on a number of other policy proposals from both the Conservative and Labour parties at their respective conferences.

In his speech to Conservatives in Birmingham, Hammond revealed that he is considering is a so-called digital sales tax to make sure there is parity between High Street retailers and eCommerce giants when it comes to HMRC.

There has been much debate recently as to ways High Street retailers could be helped through tough times by tax reform, especially as the online players many of them compete against often pay much less to the Exchequer, as highlighted by the recent Amazon our cry.

In his speech, Hammond said: “The global internet giants must contribute fairly to funding our public services. The time for talking is coming to an end and the stalling has to stop. If we cannot reach agreement, the UK will go it alone with a digital services tax of its own.”

In response, Helen Dickinson OBE, Chief Executive of the British Retail Consortium, said that the organisation welcomed the sentiment, but that special care must be taken to ensure already struggling bricks and mortar retails with online operations are not unintentionally punished:

“We agree with the Chancellor that the business tax system is in need of reform and we agree that the best way forward is through international agreement via the OECD,” said Dickinson. “We note the Chancellor’s intention to levy some form of services tax on internet companies and we are pleased he hasn’t been tempted to propose an online sales tax which would be an additional burden on retailers many of whom have online as well as physical stores.”

The BRC was also vocal on the issue of Brexit while cautiously backing the Chancellor’s general ‘back to business’ messaging, with Dickinson adding: “The retail industry firmly agrees with the Chancellor that we need friction free access to Europe to continue. A no-deal Brexit is not an option regardless what fiscal options the Chancellor can conjure up. Our food supply chain in particular relies on just-in-time practises which require frictionless trade with no delays at our borders. We must avoid the cliff edge in March at all costs. It is essential that the UK Government finds a workable solution to the Irish backstop fast, so that the Withdrawal Agreement gets over the line and tariff-free trade is protected during the transition period. Time is running out.”

“The Chancellor’s pledge to “Back Business” is welcome but the retail industry needs to see action. We require a commitment that the Treasury will reduce the overall business rates burden immediately. If the Government is to actively get “Back Business” they must support the retail industry, the country’s largest private sector employer, and reduce this disproportionate and outdated form of taxation.”

The BRC has also commented on proceedings up in Liverpool at the Labour Party conference, in particular honing in on retail-sensitive issues and policy points in Jeremy Corbyn’s keynote, most notably beats that pointed to potential cost increases for retailers.

“Retailers want to be part of building a fair, innovative and productive UK economy where society benefits,” said Dickinson. “But many may feel concerned that parts of this speech will really mean increases in business costs or taxes for an industry already under pressure.

“[On Brexit] is right to say that the business community wants to see a deal with the EU to support the free flow of goods and the role of EU workers to the British economy. Very rapid progress is needed on the Irish backstop to secure a withdrawal agreement that will provide certainty and avoid a damaging cliff-edge for retailers and consumers in March.

And on on Inclusive Ownership Funds, Dickinson added: “There are a number of great examples of employee ownership in the retail industry and retailers work hard to ensure that colleagues across the workforce have a voice. However, there is a fear amongst our members that the proposed model, which would channel excess funds into the Exchequer, would act as an indirect tax on an industry that is already under immense cost pressure.”