Online sales tax being considered to help save high street

A new tax on goods sold online is being considered by ministers as part of efforts to protect the high street and repair the battered public finances.

A call for evidence on the issue acknowledged that many retailers are opposed to such a levy, but noted that the existing business rates system favoured online firms over those with high-rental value shops.

Downing Street said the Covid-19 pandemic had already had a "significant impact" on the way business is done and the government needed to ensure that the tax system raised enough money to fund public services.

The call for evidence was examining the business rates system and potential alternatives.

"As part of this we will consider the case for introducing alternative taxes as part of the review, including an online sales tax," the spokesman said.

"The pandemic has had a significant impact on how business is done and the effect of this will become clearer over time. We will continue to support businesses as far as possible but we must also ensure that the tax system raises sufficient revenue to fund our vital public services."

The consultation document notes that "some commentators argue that the business rates system creates a distortion within the retail sector, favouring online retailers that can operate without the high-value properties that are a feature of more traditional retail".

"This has led to proposals that the government should levy a tax on companies based on their online sales, and that this could be used to fund business rates reductions for retail properties," the document said.

But opponents have raised concerns that an online sales tax "would simply increase the costs for consumers of many regularly purchased items" or make it harder for offline retailers to set up their own internet stores.