AAT opposes government’s Online Sales Tax proposals

Today (20 May 2022), the Office for National Statistics published the latest retail sales statistics for Great Britain. The data shows that non-store retail sales – predominantly made up of online retailers – are up 26.7% from pre-coronavirus March 2020 levels.

The data release coincides with the closure of the government’s consultation for an Online Sales Tax (OST).

AAT (Association of Accounting Technicians) is the first and only professional accountancy body to publicly oppose HM Treasury proposals for an OST.

AAT has repeatedly stated that the business rates system is in need of reform but in its response to the recent HM Treasury consultation, makes clear that an OST is not the solution.

The latest retail sales data published today shows the popularity of online retailers continuing to rise. Taxing such activity could potentially stifle this upward trend, at a cost to consumers, businesses and the wider economy.

Phil Hall, Head of Public Affairs and Public Policy, AAT, said:

“The government consultation puts forward a very vague idea of introducing a new tax in limited circumstances, with limited applicability, that it will not replace business rates but may help reduce them for some retailers in unspecified circumstances - all in the hope of partially addressing the fact that businesses that mostly operate online appear to pay less in business rates than ‘bricks and mortar’ competitors.

“However, recognising that many retailers now sell both online and offline, the impact of an OST is likely to be broadly negative for most UK retailers.

“The high degree of uncertainty around these proposals makes it difficult even for the most passionate proponents of an Online Sales Tax to support these proposals.

AAT has carefully considered the pros and cons of such a tax, taken on board the uniform hostility to such proposals from both its Digital Advisory and Tax Panels and concluded that the proposals should be opposed.

The AAT submission to the recent HM Treasury consultation details a wide range of criticisms. These include that:

• defining an online sale is already problematical, will become increasingly challenging in the future and as such will not only be difficult to implement, but be open to abuse
• exempting business to business sales from a new OST will almost certainly lead to evasion
• proposals to limit an OST to UK consumers but not overseas buyers of UK goods or overseas sellers to UK buyers, appears to undermine the credibility and fairness of such a tax
• rather than having environmental benefits, encouraging higher levels of instore shopping would probably lead to increased travel movements, increased pollution and increased congestion depending on the number of items purchased.