Prime Minister Rishi Sunak will wait until the fall to decide whether to introduce a UK online sales tax to match the arena between high streets and online retailers, government officials said.
Sunak wants to wait for President Joe Biden’s U.S. administration to reveal whether it will support efforts to reform global digital tax regulations led by the Paris-based OECD.
On Tuesday, the Prime Minister will release a variety of tax advice along with a summary of answers to future reviews of business rates. Sunak is considering whether to introduce a tax on online sales while also reforming its charges on commercial real estate.
Businesses are largely divided due to the advantages of online sales tax. Especially because many “brick” retailers sell their products online. Most downtown retailers prefer simple business rate cuts.
Sunak will postpone all online tax decisions and the results of a business rate review that began in July until the fall, officials said.
The prime minister’s allies said they want to see whether U.S. Treasury Secretary Janet Yellen will support a global approach to taxing digital services. The G7 summit held in Cornwall in June is considered an important moment.
A UK Treasury official said, “The US has already made some moves on this, so we want to give it some more time.
The UK introduced its own limited digital services tax in April 2020, primarily targeting large multinationals, which is expected to raise around £500 million by the end of Congress.
Separate online sales tax affects more companies. A 2% charge for goods purchased online can increase £2 billion annually. Meanwhile, business rates are a significant source of revenue for Sunak, generating around £30 billion.
When the Treasury Department announces its response to a business rate review, it can confirm that many retailers want to cut their bills rather than new taxes for online retailers.
Tej Parikh, chief economist at the Institute of Directors, added that the epidemic “just repeated the distorted competition between online retailers and offline stores.” “It’s important for the government to find ways to alleviate the high interest rate burden on high prices. Do it. While being careful not to hinder digital growth
The trade organization British Retail Consortium said it should be a key principle that retail is a taxed industry and that there should be no net additional tax burden levied on it.
The OECD is leading multinational negotiations to modernize the international tax system through two new measures. One aims to introduce a global minimum corporate tax rate.
The other allows countries to tax some of the global interests of multinational corporations based on the location of the company’s customers, even if sales are made remotely.
The bill, which would primarily hit the tech giants in the US and luxury companies in Europe, was very controversial, and the US got out of negotiations last year when it was President Trump.
The recent Biden administration’s move has attempted to ease the US position, but tax experts have suggested that the delay in the British Prime Minister’s online sales tax decision is driven primarily by domestic pressure rather than international concerns.
Dan Neidle, partner at law firm Clifford Chance, argues that the UK’s online sales tax plan is “everything about increasing profits” and will not affect the same companies as the OECD’s proposal targeting multinational tech giants.
“The OECD process will not pay taxes because either Ocado or Sainsbury are domestic companies that pay taxes in the UK. But it will,” he said.
Heather Self, a partner at accounting firm Blick Rothenberg, said he suspects the Treasury is using the OECD negotiations as a “target or excuse” struggling to reform the UK’s business interest rates.
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