UK online sales tax would be a barrier to entrepreneurship

With a budget due on the 3rd of March, concerns are high that a UK online sales tax, often dubbed an ‘Amazon Tax’, will be introduced. Two things to consider, with the pandemic still in full swing it’s unlikely to come this March and more probable in the Autumn, and it almost certainly won’t bother Amazon that much as over 55% of everything they sell is from a third party merchant and Amazon will simply pass the tax on to small businesses.

Amazon has form for passing on tax, in August last year they instantly hiked fees by 2% passing on the Digital Services Tax to UK small businesses. If anyone thinks that a UK online sales tax would be any different then they’re probably looking through rose tinted spectacles.

There is a fundamental problem in that Business Rates are excessively high for bricks and mortar retailers compared to online. That’s because they reside in expensive High Streets rather than lower rateable properties out of town. The second problem is that so much of the High Street has gone bust that the revenues are plummeting anyway. The raft of charity shops that have replaced regular retailers don’t help as they are entitled to an automatic 80% relief from non-domestic rates.

“We want to see thriving high streets, which is why we’ve spent tens of billions of pounds supporting shops throughout the pandemic and are supporting town centres through the changes online shopping brings.

“Our business rates review call for evidence included questions on whether we should shift the balance between online and physical shops by introducing an online sales tax. We’re considering responses now.”
– Treasury spokesman

Somehow the chancellor has to plug the gap in the nations finances and put a plan into place to start paying down the pandemic billions that have been liberally been flooded to support people and businesses. A UK online sales tax is an attractive way to start plugging the hole in the finances and self employed merchants trading online could face a double hit.

The self employed knowingly accepted their status as not having the security of employment benefits but when the pandemic hit, many long term self employed had SEISS grants bestowed upon them by the chancellor. It’s likely that tax revenues from the self employed will be examined as payback for bailing out their non-benefit status. This will naturally apply to all, those who didn’t need to claim as well as those who were ineligible, and so if you’re a self employed online merchant you could be looking at a hit on your profits from a UK online sales tax and then on the back end when you pay your personal taxes.

Many of the high street retailers calling for an online sales tax could end up paying it themselves as many of those that have traded in the past year have done so online. It would be ironic to see them pay less in Business Rates and end up being stung even more for their online sales. But the reality is that no one knows quite how it would work – would it apply to certain massive enterprises like Amazon, would it also apply to other marketplaces such as eBay, OnBuy and Notonthehighstreet, who don’t sell anything so in effect it would again be imposed on small businesses? Cas Paton of OnBuy certainly sees it as a danger which will impact online retail’s ability to grow.

“As we approach the budget, an online sales tax would be a huge mistake from Chancellor, Rishi Sunak. While it’s been nicknamed the ‘Amazon Tax’, the reality is that it won’t impact the big players in the market but will stifle the growth of so many independent British retailers which have relied on online sales as a lifeline over the past twelve months.
 
In the past few years, headway has been made in growing Britain’s own ecommerce industry. We’re gaining traction in developing a retail ecosystem that works for retailers and customers, that protects and supports small businesses and encourages people into bricks and mortar stores. An online sales tax will only damage this developing UK industry before it really gets off the ground and that concerns me for the sector.
 
As an online marketplace, we’ll of course feel the impact of this type of tax, but I am far more concerned about the millions of entrepreneurs and SMEs across the country. Over 6,000 independent British retailers sell on OnBuy and it is those business owners that will take the hit. It won’t touch the sides when it comes to the big corporates.
 
I think the Chancellor could be playing a dangerous game. A tax like this only increases the barriers to entrepreneurship, something the country could certainly do without in the wake of Brexit and given the state of the economy coming out of the pandemic. Restricted growth in the short term will do nothing to benefit our country or enable the growth of the British ecommerce industry that is starting to take hold. We need to protect small businesses at all costs and an online sales tax is not the way to do it.”
– Cas Paton, CEO and founder, OnBuy

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