Rishi Sunak’s online sales tax will hurt the high street, retailers warn

·2-min read
Rishi Sunak - Simon Dawson/No 10 Downing Street
Rishi Sunak - Simon Dawson/No 10 Downing Street

Rishi Sunak has been warned that proposals for an online sales levy amount to a “shopping tax” that would deepen the cost-of-living crisis and “hurt, not help, the high street”.

In a joint letter to the Chancellor, 11 prominent firms and industry groups, including Currys, Asos and Made.com say they are “deeply concerned” that the plans for online sales tax “would hit millions of households that are already struggling to cope with the highest inflation for 40 years and soaring bills”.

The companies’ intervention follows the close of a three-month consultation on the measure, which the Treasury has said could be used to overcome an “imbalance” between tax levied on retailers online and those in high streets, by funding business rates cuts.

The Treasury states that the consultation was “exploratory” and that it has not yet made a decision on whether to introduce an online sales tax (OST).

M&S recently said that a new online tax would leave retailers with less money to invest in high street shops.

In the letter to Mr Sunak, dated May 27, the companies and industry groups state: “We believe an OST would... hurt – not help – the high street, and stifle retail innovation and investment. The burden of business rates on retail is too high and needs reforming, but an additional tax on a sector that is already overtaxed is not the answer.”

The signatories also included AO, Gymshark, Ocado, eBay and The Very Group, owned by the Barclay family, which also owns Telegraph Media Group.

The industry groups backing the letter were The Coalition for a Digital Economy, which represents startups, The Association of Accounting Technicians, and techUK.

“Retailers would have little choice but to pass on an OST to consumers in the form of higher prices thereby fuelling inflation,” they state. The burden “is likely to fall heaviest” on groups including “people on lower incomes”.

Mat Dunn, the chief operating officer of Asos, said: “The last thing consumers need is an additional shopping tax on top of VAT that would further increase prices and hit people on lower incomes hardest.”

A Treasury spokesman said: “We have consulted on a potential Online Sales Tax. No decision has been made and we are continuing to explore arguments for and against. We understand that people are struggling with rising prices, and that’s why the Chancellor is providing British families with £37 billion of support this year to help.”