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Published
Feb 8, 2021
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UK mulls e-tailer tax to recoup some of Covid spend

Published
Feb 8, 2021

Pressure is building on the UK government to introduce an online sales tax in response to a major imbalance in trading conditions that has seen digital retail boom during a pandemic that has devastated physical stores.


Online retailers could be targeted by new taxes in the UK - Asos


A new ‘excessive profits tax’, also being dubbed an 'Amazon tax', is being considered as part of a business rates review after a consultation was held last year. Leaked emails also showed Treasury officials had summoned tech firms and retailers to a meeting this month to discuss the online sales tax, the Sunday Times reported.

This follows speculation that a levy of 2% on all goods bought online – potentially raising £2 billion a year – could be implemented. Treasury officials reportedly hope the money would go towards helping cover some of the £300 billion cost of Covid on the UK.

Ministers believe the tax would involve a new levy on internet shopping would “shift the balance” between spending online and in physical shops, helping stem the collapse of the high street.

With non-essential stores forced to close during lockdown, official figures show the amount spent online increased by 46% in 2020 compared with a year earlier. Online spending now accounts for about 30% of overall retail sales in Britain, up from about 20% a year ago.

According to the newspaper, chancellor Rishi Sunak is supportive of such a move, but would probably wait until the autumn to launch a raid on internet firms such as Amazon, Asos, Boohoo, Ocado and Deliveroo, rather than using the 3 March budget.

The possibility of extra tax being levied on e-commerce companies saw shares in Boohoo and Asos fall nearly 5% and 3% respectively in Monday morning trade on the London Stock Exchange.

A Treasury spokesman said: “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”.

Increasing calls to introduce such as tax follow news that Amazon UK sales rose by 51% last year to a reach £19.4 billion as lockdown restrictions forced people to buy online. Analysts say the ratio of Amazon’s tax paid to sales made is just 0.37%, compared with about 2.3% for traditional bricks-and-mortar retailers.

Although Amazon said it would not comment on the online sales tax reports, a spokesperson pointed to the fact that it has invested more than £23 billion in jobs and infrastructure in the UK since 2010. 

“Last year we created 10,000 new jobs and last week we announced 1,000 new apprenticeships. This continued investment helped contribute to a total tax contribution of £1.1 billion during 2019 – £293m in direct taxes and £854m in indirect taxes”.

Meanwhile, business groups including the British Retail Consortium (BRC) have opposed the measure, which they argue would hit high street retailers with online operations. This would result in higher costs for shoppers at a time of severe weakness in the British economy.

Helen Dickinson, chief executive of the BRC, said ministers should not prevent businesses' ability to recover from the pandemic: "The key to reviving our high streets is fundamental reform of the business rates system and we oppose any new taxes that increase the cost burden on the industry which is already too high".

She added: "Economic recovery after Covid will be powered by consumer demand - the chancellor should ensure he doesn't introduce any new taxes that stifle this”.

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