Price of online shopping and deliveries could drastically increase as result of tax hike

30 July 2020, 16:51 | Updated: 31 July 2020, 10:55

By Mared Parry

@maredparry

A new sales tax being considered by the government could indeed mean that deliveries and online shopping purchases won't be as cheap as before.

Shoppers are at risk of their purchases and deliveries skyrocketing in costs as plans are being discussed to introduce a new sales tax.

Chancellor Rishi Sunak has recently unveiled the Treasury's plans to potentially introduce the new tax which would be targeted at online sales.

This new introduction is in a bid to boost the struggling British high street and to help rebuild the economy following the devastating effects of the coronavirus pandemic.

Sunak has famously introduced a number of schemes and changes to help rebuild the failing economy, such as the Eat Out to Help Out scheme in August to get Brits out and dining again, and has reduced taxes in hospitality areas from 20 per cent to 5 per cent until January.

However, the new online shopping tax could have devastating effects for those who rely on getting their goods from the internet.

The new tax would run alongside the existing business rates tax system introduced in 1990 where retailers pay taxes based on the so-called "rateable value" - essentially the rental value - of their property.

However, there is an issue with the current system which actually favours online retailers, as they don't have to pay pricey rents.

Earlier this week the Treasury said an increase in online shopping due to coronavirus could mean taxing online sales provides a "sustainable and meaningful revenue source".

It adds that it could rebalance the system and provide a boost to struggling high streets, and continues that the introduction of a new tax would be long-term rather than a short-term stop-gap.

In a new report, The Times revealed that the online tax would be around the 2 per cent mark and that it could raise an impressive £2billion a year for the Treasury.

They also suggested that the government is also considering a mandatory charge on online deliveries. 

HM Treasury then declined to confirm these points, but there are fears these changes would mean higher prices and increased costs for online shoppers.

Tom Ironside, director of business and regulation at trade body the British Retail Consortium (BRC), said: “Taxing the sale or delivery of online goods would simply be another burden on an already overtaxed industry; one that would ultimately hit consumer spending through higher prices."