Online tax?

Rishi Sunak thinks he has an idea to save the high street

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Could a tax on internet purchases save the high street?

By Joe Harker

Chancellor of the exchequer Rishi Sunak thinks he has an idea to save the British high street: a new tax on online purchases.

Physical shops have already suffered from losing business to the internet for years, the pandemic has only exacerbated these issues further.

Encouraging people to spend more money in shops instead of online might help, but is it worth it?

The Claim:

The Treasury has highlighted concerns that business rates are harming high street shops because online retailers don't need to rent expensive locations.

They have suggested the government needs to look at the changing ways business is done and ensure the UK's tax system is up to snuff for the modern world.

If high street shops are at a disadvantage compared to online retailers then adding a new tax on internet purchases could help raise some money for the government and nudge people back onto the high street.

It's usually considered cheaper to buy online rather than in shops, but part of the impact of the pandemic has left many high street shops in a difficult situation where they need to get people through the doors.

A tax to raise some money and encourage people back into the shops could be a much needed boost for an ailing sector of the economy.

The Counter Claim:

The Treasury reckons this new online tax could raise up to £2 billion, meaning it'll hardly be popular for the public.

The government needs more money, but so does the public if they're going to go out and spend it.

This new tax might only serve to make shopping more expensive, doing nothing to tackle the real issues at the heart of the decline of the high street.

Scaring shoppers away from online retailers and back towards the high street isn't going to help much if prices just go up, as that will just cost online retailers while not boosting high street outlets.

Shops on the high street are suffering from high business rates and lower footfall, this tax might help solve the latter issue but it could struggle to have an impact when lots of people have lost money during the pandemic.

The Facts:

Online sales now represent around a third of purchases made in the UK, that proportion having spiked during the lockdown when shops were shut.

There is often talk about how the pandemic will change habits, if it means more people are shopping online permanently then it will be a huge problem for physical shops.

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The Times

Rishi Sunak considers online sales tax in bid to save high street

Rishi Sunak is considering a new tax on goods sold online amid mounting concern about the collapse of the high street as Britain emerges from the coronavirus crisis.

The chancellor is examining proposals for an online sales tax to provide a “sustainable and meaningful revenue source for the government” and help bricks-and-mortar retailers to compete.

In a call for evidence published last week, the Treasury highlighted concerns that business rates were effectively penalising the high street because online rivals did not need to rent “high-value” properties.

It said that the coronavirus crisis “has had a significant impact on how business is done” and that the government must act to make sure that “the tax system raises sufficient revenue”.

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