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27 Oct 2021

Autumn Budget 2021: government to consult on online sales tax

How could a new tax on online retailers affect the cost of your shopping?

The government has announced a consultation on a new 'online sales tax' for online retailers in its Autumn 2021 Budget and Spending Review.

Online shopping has soared during the pandemic, while high street retailers have been hard hit by lockdown restrictions.

To address this imbalance and protect the high street, the government is considering a UK-wide online sales tax for online retailers - the revenue from which would be used to reduce business rates for in-store retailers in England.

Increasing taxes for the likes of Amazon, Asos and eBay might sound good in theory, but could it increase the prices you see online and in-store?

Read on to find out how a new online sales tax could change how much you pay at the checkout.

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What is the online sales tax?

Despite an explosion in online shopping since Covid, online-only retailers currently pay less in business rates than bricks and mortar stores.

To level out the playing field, the government is considering an online sales tax to counteract the tax burden imbalance between online and in-store retailers.

Dubbed the 'Amazon tax', it could see big online retail giants such as Amazon, Asos and eBay pay increased taxes.

A 2% levy on online orders has previously been proposed, with the aim of raising £2billion each year and bringing online retailer tax obligations more in-line with those of bricks and mortar stores.

This revenue could even allow the government to reduce business rates for retailers with properties in England, stemming the tide of high street closures.

Advocates for the tax argue it could help protect high streets from further collapse following a string of retailers falling into administration during the pandemic.

But critics such as the British Retail Consortium have opposed it, arguing that high street retailers with online operations would also be hit.

The government is continuing to explore arguments for and against the internet shopping levy and will be publishing a consultation shortly.

How could it impact online and in-store prices?

An increase in tax could lead to online retailers raising their prices.

Online retailers with thin margins could be forced to pass on the extra costs to consumers, which could result in your online orders costing more than they used to.

That said, online retailers who can afford to will likely want to keep prices as competitive as possible.

There are arguments that the tax could impact in-store pricing too.

High street stores are currently limited to what they can charge due to competitive online prices.

But if online stores start charging more, there's nothing to stop in-store retailers increasing their prices to reflect online listings.

There's no concrete answers yet on how the tax will work or whether it will happen at all - we might have to wait for the 2022 Spring Budget to find out more.

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