Assessing an online sales tax

Online taxes have been in place in many parts of the world for a number of years. They are used to try and level the playing field between online and traditional businesses. This paper provides a literature review of online taxes in India, France and the USA. This assesses the impact of different digital taxes on businesses and consumers, to provide an understanding of the potential impact of an online sales tax in the UK if one were ever to be implemented.

Introducing an online sales tax would not support the high street, but see costs rise for consumers, while business innovation and growth would be stifled. The poorest households would suffer the most under this form of indirect taxation, exacerbating income inequality. Meanwhile, it would act as a deterrent to businesses on and off the high street from setting up or maintaining their online presence.

High street leaders are calling for their fixed costs to be reduced, and the government could do this by reforming business rates, which would be a better tool to level the playing field. It would lift the high street up by cutting their costs, rather than dragging retailers down with additional taxation.


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