The ‘retail war’ over the introduction of an online sales tax (OTS) is raging, with Asda the latest to openly reject the idea after joining a number of retail giants to express their concerns to Lucy Frazer, the Treasury’s financial secretary and minister responsible for fiscal policy.
Stores with an online presence will be burdened with an additional levy that will help fund permanent commercial rate reductions for stores with a physical presence.
Retail giants Tesco, Sainsbury’s, Morrisons and Kingfisher recently formed a coalition, the Retail Jobs Alliance, in support of the new tax.
The group argues that the current tariffs impose an unfair burden on retailers with physical stores, despite the growing shift of consumers to online shopping, especially after the pandemic, suggesting that a reduction will level the playing field between both.
Retail Jobs Alliance justifies the move by saying it would allow them to keep prices low for customers in times of runaway inflation.
On top of that, the extra money they would have would help invest in stores and create new jobs, the group said in a letter to Chancellor of the Exchequer Rishi Sunak.
They also pointed out that many of them have an online presence as well, so they would pay any online sales tax while getting the business rate cut.
“We agree that reducing the retail sales tax must be a political priority and that a tax on online sales would be acceptable as part of a package of retail sales tax reforms that rebalance the system” , says the letter to Sunak.
However, not all retailers have been so warm and welcoming to the idea.
As mentioned above, Asda became the latest retailer to reject the idea, joining Asos, Amazon, eBay and others.
Asda suggests the tax would do more harm than good for both retailers and consumers, while Asos suggests the tax would raise prices.
“In our view, the last thing consumers need is an additional shopping tax which would drive up prices even further and hit those on low incomes harder,” an Asos spokesperson told the Retail Gazette.
E-commerce giants Amazon and eBay also warned Frazer that the move would hurt small and medium-sized businesses trading on their respective sites.
Currently, the government is evaluating the responses to its consultation, but a decision has not yet been made.
“We have not decided whether or not to proceed with an online sales tax. The aim of the recent consultation was to examine the design options and economic impacts of such a tax and to explore the arguments for and against,” a Treasury spokesman said.