Chancellor of the Exchequer Rishi Sunak is planning to introduce an online sales tax on goods sold online as well as online deliveries which will be detrimental for online innovators.

Instead of the government to advance the online sales market which has done so well over the last few months and move towards the digital future they are proposing more taxation under the guise of saving the high street.

Online Sales have flourished during lockdown whilst the high street has inevitably seen a sharp decline in sales revenue.

At the start of the lockdown Sunak announced several reliefs for businesses which included a business rates holiday (tax charged on buildings used for non-domestic use) for brick-and-mortar shops.

The government has distributed over £300bn in a bid to keep the economy afloat during Coronavirus and are now trying to make that money back as Rishi Sunak stated that introducing an online sales tax will ‘provide a sustainable and meaningful revenue source for the government and help high street stores compete’.

Two forms of online sales tax are being proposed; the first being a 2% levy on all goods sold online which is estimated to make the government £2bn annually and the second is a mandatory charge on consumer deliveries which Sunak says will reduce congestion on the roads and cut toxic emissions.

The Issues With The Online Sales Tax

The levy on online sales being proposed is being justified as the alternative for online retailers to business rates, which brick-and-mortar shops are charged, to balance the scales.

Sunak has said that an online sales tax will protect the high street from becoming obsolete which seems out of touch as the high street has been on its way out for a while.

The proposed tax also poses a problem for vulnerable people that are more at risk of contracting coronavirus who choose to continue staying at home despite the country opening back up again.

It will impact disabled people who find it easier to browse and shop online and will have to pay for the higher product costs that will inevitably rise as a result of retailers being overtaxed.

Small businesses such as online fashion brands that are already strained as a result of Coronavirus will also be affected by the proposed online sales tax which in the long run could discourage potential entrepreneurs and innovators who’s first point of entry would be the online sphere from starting up.

A decision will be made on the introduction of the proposed policies in Spring 2021.