UK Government to introduce Digital Tax

Despite an industry lobbying for a relief of Business Rates, the UK government is clashing with retailer on another front, by introducing a digital tax on internet sales.

Chancellor Philip Hammond in his Budget speech last week, proposed retailers pay a digital levy, including e-commerce giants Amazon, in a bid to help revive the high street.

Amazon, for example, pays a slim fraction of the rates of high street-based groups. Amazon will see the total business rates bill for its nine main distribution centres in England and Wales cut by 148,000 pounds to 11.3 million pounds a year, despite posting annual sales in excess of 6 billion pounds.

But it is the small companies who will suffer the most. Entrepreneurs, emerging brands, new boutiques and online startups will have had to deal with the doubling of insurance premium tax, automatic pension enrolment, the extra cost of the living wage, the infrastructure levy, the revaluation of business rates and now the “making tax digital” plan, said the Daily Telegraph.

Other online groups, including Asos, AO and Shop Direct, which owns Very, have all seen bills drop by 2 per cent on their warehouses. The cut is paid for by increases in areas where property values have soared to keep the overall total the same.

According to Bloomberg, changes to the tax system could be introduced at the autumn budget, which will become the chancellor’s main fiscal event of the year. The UK's outdated model of business rates taxomeans bricks and mortar business pay the majority, despite online sales accounting for over 12 percent of all retail sales in the U.K., the highest proportion globally, according to Mintel.