A think tank has proposed a online sales tax to fund business rates cuts aimed at supporting high street retailers, which could raise an estimated £1.5bn.
The Institute for Public Policy Research (IPPR) suggests a 2% levy on remote sales by large retailers, with a reduced 1% rate for click-and-collect purchases, which it says bring shoppers into physical stores. Smaller businesses would pay nothing on their first £500,000 of remote sales each year.
The IPPR argues the tax system has failed to keep pace with online shopping, which now accounts for nearly three in 10 retail sales.
It says the revenue should be used to lower the business rates multiplier for retail, hospitality and leisure firms, at an estimated cost of around £900m in England.
‘Supporting the high street is not at odds with technological change and does not work against consumer preferences to shop online. The problem is not that online retail has grown, but that the tax system has failed to adapt alongside it,’ writes Aditi Sriram from the IPPR.
‘Businesses no longer need the same physical footprint to generate sales, and the value of commercial property is an increasingly weaker proxy for economic activity. While broader reform of business rates will take time, an online sales tax offers a practical first step, shifting some of the tax burden away from commercial property and towards the sales businesses generate.’
