Tax warning: An online sales tax will ‘impact low income households’ – you may carry costs

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Rishi Sunak is, reportedly, planning on introducing a two percent tax on goods sold online. On top of this, a “green levy” could be charged on delivery vans.

It should be noted that nothing has been confirmed thus far but the proposals have already drawn numerous comments and views from private companies and public institutions alike.

Martin Gurney, a partner at Haines Watts Swindon, was sympathetic to the government’s cause: “There is pressure on the Government to raise revenue to fund their spending on Coronavirus support.

“The challenge for the Government is to find mechanisms to raise funds without further destabilising an already precarious economy.

“In principle, therefore, an online sales tax would seem like a logical step.

“The value of online shopping transactions has escalated in recent years.

“The concept of raising additional revenue from, in particular, overseas retailers selling online in the UK certainly seems sensible.”

However, Martin went on to warn that the costs of this plan would eventually be passed on to consumers who are already struggling to keep their head above water.

As he continued: “The issue, however, is that the cost on such ‘indirect’ taxes gets passed on to the consumer, therefore such measures are often seen as taxing low-income households disproportionately.

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On top of this, he revealed that the side effects of globalisation could be an issue: “There are also potential practical difficulties.

“How would the Government seek to enforce taxes against organisations that may have absolutely no physical presence in the UK?

“Imported goods can be impounded at the point of entry to the UK as a mechanism to ensure taxes are paid, but electronically supplied services cannot be similarly captured.

“It will certainly be a challenge to make such a system workable.”

Martin concluded by reiterating his worry that while “the money has to come from somewhere”, the tax would ultimately harm low income households.

While this may be the case it should be noted that the government are currently working on a tax inquiry to see how the overall economy could handle such changes.

The inquiry, launched by the treasury committee, will look into how the economy could look post-lockdown and what role tax could play in reshaping the country.

The committee detailed that they will look at what the major long-term pressures on the UK tax system are and what the country can do to protect its tax base from global changes.

In the official announcement, the committee confirmed that they: “Will also seek evidence on what overall level of taxation the economy can bear, the role of tax reliefs in rebuilding the economy, and whether there is a role for windfall taxes in the post-coronavirus world.”

Mel Stride, the Chair of the treasury, provided the following comments along with the announcement: “The UK economy, like many economies around the world, has been placed under extraordinary stress due to coronavirus, with the worst of the economic fallout perhaps yet to come.

“Tax will play a major role in the years ahead in restoring the public finances and ensuring that we have a recovery which is balanced across the UK and fair to all.”

“So the Treasury Committee has launched this inquiry to examine how the Government should approach taxation after the coronavirus.”

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