The British Treasury is exploring the possibility of an online sales tax as the Covid-19 crisis accelerates the deterioration of traditional high streets across the country. The idea is not new, just controversial.
Empty high streets
According to The Guardian, the UK Treasury considers various ways of shifting the balance between online spending and spending in physical stores. The British government is increasingly concerned about the consequences of the Covid-19 crisis and the rapid rise of e-commerce. A record number of stores are disappearing from high streets, partly due to successive lockdowns, and some fear that the cities will have changed permanently when the coronavirus measures get eased again.
Some politicians believe that an e-commerce tax could help prevent the collapse of the high streets. But, the British Retail Consortium, among others, has already warned that such a tax will also hit shopkeepers with an online shop. Moreover, the measure would also lead to higher prices for shoppers, and that in the middle of a crisis.
Level playing field
CEOs of a few large retailers, including Tesco, Morrisons, Asda and Waterstones are in favour of an online tax. They particularly insist on a level playing field. In the United Kingdom, retailers are partially taxed on the retail space in which they operate (the so-called 'business rates'). This gives players who solely operate online, such as Amazon, a big advantage.
Driven by the Covid-19 crisis, online spending in the UK increased by 46 per cent last year. E-commerce now accounts for 30 per cent of total retail sales.
"1.1 billion pounds in taxes paid"
Amazon's sales even increased last year by 51 per cent to 19.4 billion pounds (22.1 billion euros). Real estate consultancy Altus Group calculated that the American company had a "tax-to-turnover ratio" (tax as a percentage of revenue) of just 0.37 per cent compared to an average of 2.3 per cent for traditional retailers.
Amazon responded to the coverage by stating that it has invested more than £23 billion (€26.2 billion) 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 contributed to a total tax contribution of 1.1 billion pounds (1.25 billion euros) in 2019 - 293 million pounds (334 million euros) in direct taxes and 854 million pounds (972 million euros) in indirect taxes," a spokesman said.