The ‘retail war’ over the introduction of an online sales tax (OTS) rages on, with Asda the latest to openly reject the idea after joining a number of retail giants to express their concerns to Lucy Frazer, the financial secretary to the Treasury and minister responsible for tax policy.
Stores with an online presence will be burdened with an additional tax that will help fund permanent business rate cuts for stores with a physical presence.
Retail giants Tesco, Sainsbury’s, Morrisons and Kingfisher recently formed a coalition, the Retail Jobs Alliance, in favour of the new tax.
The group argues that the current rates put an unfair burden on retailers with brick-and-mortar shops, despite there being an increasing consumer shift towards online shopping, particularly after the pandemic, suggesting a cut will level the playing field between the two.
Retail Jobs Alliance justifies the move by arguing that it would allow them to keep prices down for customers during times of spiralling inflation.
As well as that, the extra cash they would have available to hand would allow for investment in the shops and the creation of new jobs, the group said in a letter to Chancellor of the Exchequer Rishi Sunak.
They also pointed out that many of them also have an online presence, so would pay any online sales tax while also benefitting from the business rates cut.
“We agree that cutting the Shops Tax must be a policy priority and that an online sales tax would be acceptable as part of a package of retail tax reform that rebalances the system,” the letter to Sunak said.
However, not all retailers have been so warm and welcoming of the idea.
As mentioned above, Asda became the latest retailer to reject the idea, joining Asos, Amazon, eBay and others.
Asda suggests that the tax would do more harm than good, for both retailers and consumers, while Asos suggests the tax would increase prices.
“In our view, the last thing consumers need is an additional shopping tax that would further increase prices and hit people on lower incomes hardest,” an Asos spokesperson said in the Retail Gazette.
Ecommerce giants Amazon and eBay also warned Frazer that the move would harm small to medium-sized businesses that trade on their respective sites.
Currently, the government is evaluating responses from its consultation, with a decision still to be made.
“We have not decided whether to proceed with an online sales tax. The purpose of the recent consultation was to consider the design options and economic impacts of such a tax and explore the arguments for and against,” a Treasury spokesperson said.