The government has been warned that an online sales tax could cost families a further £175 a year.
The government has proposed the idea. This would mean that the government could support high street retailers at the expense online retailers.
A new paper from the Centre for Policy Studies, supported by the Coalition for a Digital Economy (Coadec), today says this fresh tax would do more harm than good to consumers, businesses and the economy – as the government’s own consultation paper to a large extent acknowledges.
A poll shows that 83% of businesses selling online will pass the cost for an online sales tax to consumers. An economic analysis showed that consumers would absorb 72% of the tax’s cost. The UK’s poorest households could face an additional financial burden of up to £76 a year, rising to a potential average of £175 across all income brackets.
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Inflation hit 9 percent in April. The Bank of England said it could soar to 11 percent by October.
This has led to the tax being wildly unpopular with both small businesses and voters. Public First for Coadec found that 46% of micro-businesses oppose the tax, while 46% of consumers support it. Only 29% are strongly against. The lowest income bracket where there was majority approval for the measures was from those on over £70,000 a year.
CPS also complains that such taxes would impede competition, stifle innovative thinking and distort market dynamics. Their research also claims it would be difficult to design and costly to implement, directly contradicting the government’s commitment to increase growth, simplify taxation and ease the cost of living crisis. It could also be detrimental to the firms it is meant for: 87% of small high street shops believe that having an online presence makes them more successful.
Dom Hallas, executive director of Coadec, said: “As consumers and small businesses grapple with a cost of living crisis, an online sales tax wouldn’t help them at all. It would not only affect the pockets of hard-pressed consumers but it would also penalize and deter innovation, investment and competition.
“The UK’s e-commerce sector was world-leading even before the Pandemic led adoption to skyrocket. Efforts to reinvigorate the High Street are needed and laudable, but punishing progress is no sure way to get there.”
