New online sales tax plan could hinder competition and recovery, warn finance gurus

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Government proposals to introduce a new online sales tax for internet retailers need to be carefully thought out so not to hinder competition and the UK’s economic recovery.

That’s the warning from Milton Keynes-based financial and business advisors Grant Thornton over a proposed ‘market place fairness tax’ that aims to create a level playing field between high street shops and their cheaper online competitors.

Hazel Platt, tax director at company’s Silbury Boulevard office, said: “If the new levy, which would apply to the sale of online goods and services, goes ahead, it will be important for the government to set the tax at the correct level so that it doesn’t have a detrimental effect on the UK’s entrepreneurial spirit and financial recovery.

“Many online retailers that we buy from are also located overseas so it is difficult at this stage to see how the legislation will be regulated. It is also unclear as to whether the levy would apply solely to online-only businesses or to shops which also have an online presence.”

The US is already introducing a similar measure under the US Marketplace Fairness Act 2013, which will affect all companies that have transactions of more than £1m from online sales.

Hazel concludes: “Undoubtedly high street retailers face tough times with business rates over the past three years rising on average by 13 per cent and we would encourage any move by the government to encourage economic growth, but the Chancellor will need to ensure that he is not ‘robbing Peter to pay Paul’ with this move.”

The proposal has already provoked a strong reaction from the online industry but the bricks-and-mortar trade say the move would rectify the ‘massive disadvantage’ they face.

Grant Thornton’s Milton Keynes office has approximately 160 staff providing business and financial advice to organisations in Beds, Bucks and Herts.