TaxPayers’ Alliance reveals online sales tax could cost households £150 a year

Embargoed: 00:01 Saturday 26 December 2020

 

As the Boxing Day sales begin, research from the TaxPayers’ Alliance has revealed that an online sales tax could hit the average household with up to £151 in additional tax each year. The campaign group says that it’s important to support the high street after a torrid year - but new taxes on online sales are not the way to do it.

With the impact of coronavirus seeing a huge jump in demand for online orders, the paper shows that a new tax would hit the poorest and most vulnerable - who have relied on online shopping even before the pandemic. The paper finds that the elderly could pay an extra £102 a year in extra tax, and those on the lowest incomes up to £65 a year. According to ONS figures, the lowest 10 per cent of households in the income distribution already lose 44 per cent of their gross income through tax.

Analysis shows that with 70 per cent of small high street retailers already having a website, imposing an online sales tax could force a large proportion of those businesses into paying it. That would leave the levy looking like a revenue raiser for the government, rather than a tool to support the high street.

The uncertainty caused by covid-19 confirms the need for a continued reduction in business rates for the smallest high street retailers to make them more competitive.

 

Table: hypothetical costs of an online sales tax to households under different rates

 

Click here to read the research paper

 

Key Findings:

  • Under a six per cent rate, the average household could pay an extra £151 in tax per year.

  • The imposition of a two per cent online sales tax would create an additional tax bill of £34 for the elderly, rising to £102 at six per cent.

  • An online sales tax of two per cent would hit the poorest with an additional £22 tax bill each year, rising to £65 at six per cent. They already lose 44.3 per cent of their gross income to direct and indirect taxes.

  • Figures are based on what an online sales tax may look like, as well as what rate it could be set at, by using international precedent. The paper analyses digital taxes in France, India and the US.

 

Click here to read the research paper

 

John O’Connell, chief executive of the TaxPayers' Alliance, said:

"Online orders are now the norm, and offer a lifeline for the most vulnerable. At the same time, we all know that the high street is struggling - but imposing damaging digital taxes will do nothing to level the playing field.

"Instead of punishing progress, the government should drop an online sales tax and cut business rates to make local shops more competitive."

 


TPA spokesmen are available for live and pre-recorded broadcast interviews via 07795 084 113 (no texts)



Media contact:

Harry Fone
Campaign Manager, TaxPayers' Alliance
harry.fone@taxpayersalliance.com
24-hour media hotline: 07795 084 113 (no texts)

 

Notes to editors:

  1. Founded in 2004 by Matthew Elliott and Andrew Allum, the TaxPayers' Alliance (TPA) campaigns to reform taxes and public services, cut waste and speak up for British taxpayers. Find out more at www.taxpayersalliance.com.

  2. TaxPayers' Alliance's advisory council.

  3. The TaxPayers’ Alliance have released an online sales tax briefing.
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