Treasury vetoes calls for online sales tax

Government quashes hopes of measures to level offline playing field after retail bosses warn of online impact on industry

The Treasury has ruled out the prospect of introducing an online sales tax in response to calls from traditional bricks and mortar retailers.

The veto was confirmed in a a letter responding to the chief executives of six online retailers urging the government not to bow to pressure of the likes of Morrisons chief executive Dalton Philips, who in June said an e-commerce tax was necessary to level the playing field with High Street retailers that have to pay extortionate business rates.

David Gauke, the Exchequer Secretary to the Treasury, was responding to the chief executives of Ocado, N Brown, Shop Direct, Boden, Appliances Online and notonthehighstreet.com, when he wrote that the government favoured “an approach which aims to ensure common principles apply to all businesses whether operating online, from physical premises or with a combination”.

Call for multinational tax reform

But the letter also said the government was committed to reforming tax rules for multinationals on a global scale by working with the G20 and the Organisation for Economic Co-operation and Development (OECD).

"Many online businesses operate across international borders and it is therefore important to have international agreement on the principles of how multinational businesses, including online, are taxed," wrote Gauke.

The letter also conceded that the issues were "extremely complex". "With large parts of the economy moving towards having some form of digital presence, it is important to ensure fair competition between digital and non-digital businesses,” it added.

Retail trade body, the British Retail Consortium (BRC), agreed in a statement that an online tax would be counterproductive. Instead, Helen Dickinson, BRC director-general, stated: “Business rates in particular have long since ceased to be fit for purpose.”