PROPOSALS to introduce a ‘marketplace fairness tax’ in order to level the playing field between online and high street retailers have been met with concern by practitioners.
The tax would be levied on the sale of online goods and services, with the aim of reducing the disparity between the relatively low tax burden borne by online-only retailers and the heavier liability incumbent on their high street counterparts.
The US is already introducing the measure in the Marketplace Fairness Act 2013, and Sainsbury’s chief executive Justin King has called on the government to follow the American example, warning that business rates are crippling the high street because there is no equivalent for online businesses.
But members of the UK200Group of accountants expressed doubts over whether the move would have the desired effect.
Partner at UK200Group firm ReesRussell, Jonathan Russell, said a more pressing issue was profit shifting by multinational online retailers.
He said: “We have a mixed message and complaint about business rates, because online retailers are not removed from these as they still pay business rates on warehousing and offices as business rates are not restricted to retail premises alone.
“However, there is a huge imbalance in tax burden for some of the large online retailers who claim to operate in countries other than that of the end customer and pay lower taxes as a result. This is not just unfair on traditional shop retailers but also unfair to the UK based online retailers paying UK taxes.
He added: “This is not a problem about online retailing but about the government’s failure to write efficient tax legislation to capture taxes on where profits are actually generated, rather than where the large corporation choose to say they are generated.”
Former UK200Group president David Ingall warned the measure could have unintended consequences.
He said: “While appearing to be sensible and fair, the imposition of such a tax needs to be carefully thought through. These knee jerk tax changes very often fall foul of the law of unintended consequences. Extending the tax base outside our country will affect others, how will those countries react? And the EU? One cannot imagine, or can we?”
The current business rates system is over-complex and reform is needed, but reforms should focus first of all on simplifying the appeals process, particularly for businesses which are subject to business rates exemption
The CIoT has called on the government to rethink its approach to ensuring online sellers pay the correct amount of VAT.
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