Online sales tax plans binned, but reforms coming for multinationals

By

Nigel TAYLOR

Published
Nov 18, 2022

As we start to understand more about the implications of this week’s budget, one thing has become clear — the online sales tax is a non-starter.

But UK chancellor Jeremy Hunt is to introduce a major tax reform to ensure multinational companies such as Amazon pay a fair amount of tax in the UK. However, the historic reform won’t be introduced until the end of December 2023.

At the same, the government is also scrapping plans for the online sales tax, moving away from what had been seen as a key booster for the UK high street.

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Following a consultation, it said this decision “reflects concerns raised about an online sales tax’s complexity and the risk of creating unintended distortion or unfair outcomes between different business models”.

The levy would have been designed to help in-store retailers at the expense of online retailers, imposing an extra tax on purchases at the likes of Amazon and ASOS. It promised the full details of the online sales tax consultation would be published “shortly”.

But the boss of London’s Westfield shopping malls said the chancellor had “missed a major opportunity” by scrapping the online sales tax idea.

Unibail-Rodamco-Westfield UK COO Scott Parsons told Charged Retail Tech News:“Whilst I welcome the government’s clear and decisive action on business rates for the retail, hospitality and leisure sectors, particularly on revaluation, the chancellor has missed a major opportunity by scrapping an online sales tax.

“Physical retailers pay significantly more in taxes as well as being faced with rising operational costs, while online retailers continue to be let off the hook. I believe online retailers can happily coexist with a healthy high street but only when a broad-based, clear and easily levied online sales tax is introduced.”

In this week’s Autumn Statement, the government also said it will introduce The Organisation for Economic Co-operation and Development’s (OECD) historic global tax reforms “to make sure multinational corporations – including big tech companies – pay the right tax in the countries they operate, so the UK gets its fair share.”

It follows a global effort to curb the powers of Big Tech and tax-avoidance scandals.

The G20 has called on the OECD to reform the global corporate tax system. A package of reforms known as the ‘Base Erosion and Profit Shifting’ Project (BEPS) was introduced as a result.

The OECD led the reform process and opened it up to developing countries after the initial package was unveiled. Over 125 countries are now involved in a group which is referred to as the ‘Inclusive Framework’.

While claims BEPS has brought a degree of stability to the global tax sector, observers note that Big Tech and multinational companies still deploy a number of strategies in order to avoid paying tax, with public distrust remaining high.