Chancellor promises 'digital sales tax'

The chancellor has pledged a new "digital sales tax" to redress the taxation balance between High Street retailers and online technology companies.

Speaking at the Conservative Party Conference yesterday, Philip Hammond said that taxing international companies would have to be through international agreements.

"But the time for talking is coming to an end and the stalling has to stop,” he stated. “If we cannot reach agreement the UK will go it alone with a digital services tax – the global internet giants must contribute fairly to funding our public services.”

Hammond had previously considered a so-called 'Amazon tax' earlier in the summer, noting that the UK is changing shopping habits, with more people buying things online, which has knock-on effects for bricks and mortar shops.

Responding to his promise that the Conservatives would “back business”, British Retail Consortium chief executive Helen Dickinson said the retail industry needs to see action.

“We require a commitment that the Treasury will reduce the overall business rates burden immediately. If the government is to actively ‘back business’ they must support the retail industry, the country's largest private sector employer, and reduce this disproportionate and outdated form of taxation.”

She agreed that the business tax system is in need of reform and that the best way forward is through international agreement via the Organisation for Economic Co-operation and Development (OECD).

“We note the Chancellor's intention to levy some form of services tax on internet companies and we are pleased he hasn't been tempted to propose an online sales tax which would be an additional burden on retailers many of whom have online as well as physical stores,” added Dickinson.

Last November, Hammond suggested a cut to business rates, to bring them in line with the lower Consumer Prices Index (CPI) measure of inflation, rather than the Retail Prices Index (RPI).

The BRC responded at the time that this did not go far enough, pointing out that if the inflation figure stays the same, retailers will have to pay an extra £190 million in annual business rates from April 2019.

The BRC has been campaigning for several months to balance the rates physical and online retailers pay, calling for a freeze in the current tax rate levied – which it stated cost the industry £7 billion last year.

Meanwhile, at a fringe event at the conference, the business secretary Greg Clark said that the Treasury is conducting a review of business rates.

He stated that High Street retailers “make a big contribution to the community, and to villages, towns and cities… and I think some recognition of that is required”.

Last week, the shadow business secretary promised to save the High Street from “a slow and agonising death” with a five-point plan of reforms at the Labour Party conference - including an "overhaul the broken business rates system which is hammering retail”.

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