Designing a OST would not be straightforward, and the consultation document spells out many areas of difficulty.
“While an OST seems, at first glance, to be a good idea to level the playing field caused by the burden of trade tariffs on in-store retailers, once you start looking at the challenges of introducing tax in practice, it is far from a magic bullet to reduce main street decline,” Walker said.
One of the main challenges in designing an OST would be to distinguish between online and offline activity. An example given is whether the tax should apply to transactions made over the Internet in any form: including, for example, in-store purchases made through an app or transactions made through any remote technology, including including telephone and mail order.
Another issue highlighted in the consultation paper is whether click and collect purchases should be covered by a corporate action. Some proponents of a corporate action have called for these sales to be exempt on the grounds that when the collection point is a physical store, they continue to drive footfall to physical stores. However, a click and collect location could be a locker in a transport hub. An exemption for all click and collect orders could mean that delivery to a residential address is treated differently than collection from a locker on a street corner, even if they are similar transactions.
“While business pricing undoubtedly causes distortions between online and physical retailers, the problem is that it generates a huge amount of revenue, which would be hard to find elsewhere,” said Clara Boyd, expert in indirect taxation at Pinsent Masons.
Corporate tariffs bring in more than £25billion a year in England, according to the consultation paper. Raising comparable amounts under the VAT system would require an increase of around 3 to 4 pence in the standard rate. An increase of around 5 pence in the basic rate of income tax would be needed to raise a similar amount.
A corporate action levied at 1% or 2% would not generate enough revenue to fully replace the estimated £7.5billion rates imposed on retailers, according to government estimates.
Some also suggest that because business rates are often capitalized into rents, the benefits of reduced retail business rates would largely accrue to the property owner, not the retailer, resulting in higher rents. high, according to the consultation document. .
OST would likely be borne by sellers. However, the government considers that it would be likely to pass on to consumers. He wants to gather further evidence on the risk of specific groups being disproportionately affected by an OSI. Affected groups could include those who spend a greater proportion of their income on discretionary goods and services, those who live farther from a main street or shopping mall, and people with reduced mobility.