• The idea of a sales tax on internet sales has already been considered, but seems to prefer international cooperation. However, the elimination of business rates means this is not a internet tax per se, but rather a tax independent of location
Issues:
• Business rates are paid to local councils. It will be necessary to allocate the sales tax to councils, based first on local sales, and then a provision to cover offices, warehouses and manufacturing locations, with any balance going to the government’s business rate top up
• While a rate of two per cent has been discussed as the internet tax rate, it should rather be set based on a range of companies’ current business rates if this is effectively higher
• Collection will be simultaneous with VAT, so businesses and councils may need to allow for a different timing
Benefits:
• Reduction of the penalty of bricks and mortar. There will still be costs of maintenance and improvement but the choice between having buildings or not will be fairer
• By converting a fixed cost to a variable one it helps start-up businesses and simplifies the calculation of government help during a pandemic
• Council cost associated with valuing business premises will be eliminated
• Internet companies will pay these taxes
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