UK Business Tariff Review Could Tax Streaming Services and Online Products | Retail business

Streaming services, such as Netflix and Spotify, online newspapers, e-books and items reserved online but picked up in-store could face a new online sales tax if ministers give it the green light.

In a long-awaited final report on a review of trade rates, the Treasury said it will soon launch a consultation on a new tax on online goods and services, which is expected to end next year.

If an online sales tax were to be pursued, the report said “design choices” would have to be made about what should be taxable, including digital products, sales agreed by email or instant message, and essential items such as most foods, medicines and children’s clothing, which currently are not subject to VAT.

But the consultation added that it was likely that any additional cost of such a tax would be passed on to consumers at a high rate, suggesting it would be “regressive” – ​​or borne more heavily by low-income households.

The release of the detailed review comes after the government announced in the budget last week that it would “explore the pros and cons” of an online sales tax that could fund lower trade rates for large retailers. Street. The report says a new tax set at 1% to 2% would not raise enough money to replace corporate rates, but could “help rebalance the tax burden between physical stores and retail in line”.

Despite widespread calls from the retail and hospitality sectors, which partly blame the hefty corporate tariff bills for the massive UK Main Street closures, the report says there is no need to fundamentally overhaul the property tax which brings in £ 25 billion a year.

The government review said: “The evidence provided has not established that the corporate pricing system is responsible for the Internet switchover or wider issues on Main Street. Other factors that may be relevant include changing consumer preferences, improved choice and convenience available to online shoppers, and differences in the amount of stock that physical stores offer compared to online retailers. .

Store owners say they are at a disadvantage by paying higher taxes than online specialists such as Amazon, Boohoo, and Asos who distract shoppers from local thoroughfares.

Last month Labor pledged to cut corporate rates and undertake the “biggest corporate tax overhaul in a generation” if passed in the next election.

In his budget speech last week, Chancellor Rishi Sunak said he would help small retail and hospitality businesses with a temporary 50% cut.

However, industry groups have said the cut, which is capped at £ 110,000 per business and will last for one year, would only benefit small retailers, bars, restaurants and pubs, as large stores such as one department store can pay over £ 1million per year. year in rate.

The cancellation of the planned hike in business rates next year – which would have added just over £ 1bn to bills, analysts at property advisor Altus say, and a quarter of which has been paid by the retailers – was well received but was not seen as a long term solution.