Chancellor John Healey should impose a 2 per cent tax on internet purchases to support physical high street businesses across the UK, an influential think tank has urged, reports BritPanorama.
The Institute for Public Policy Research (IPPR) also recommended a 1 per cent tax on click and collect services as part of broader measures ahead of Mr Healey’s upcoming financial statement on October 28.
This proposal comes as the government seeks new revenue streams to bolster local economies and assist businesses in adapting to a changing retail landscape.
Aditi Sriram, an economist at the IPPR, pressed the government to “shift some of the tax burden from bricks to clicks,” arguing that online retailers do not face the same hurdles as traditional high street shops.
The proposed measures could potentially raise an estimated £1.5 billion, with funds ear marked for reducing business rates for leisure, hospitality, and retail outlets.
The IPPR, which has previously aligned itself with the Labour Party, stated that a business’s initial £500,000 in annual remote sales would be tax-exempt to safeguard smaller retailers from the tax burden.
According to IPPR calculations, small businesses could benefit by approximately £1,400 annually, while larger firms could see an increase of around £2,500, with local authorities “fully compensated” for any lost revenue from business rates.
Mr Sriram, author of the IPPR report, highlighted that “Britain’s tax system was built for an era when the location where you did business was closely linked to how much business you did. That is no longer the case.”
He continued, “As people have moved their shopping online, high street shops and restaurants continue to face large, fixed tax bills simply because they need physical premises. The government should shift some of the tax burden from bricks to clicks and use the money to cut bills for the businesses that bring people onto our high streets.”
Furthermore, the report suggests a decrease in retail, hospitality, and leisure business rates multipliers in England, currently set at 38.2p for small properties and 43p for standard ones, reducing them to 28.2p and 41p, respectively.
Last month, Andy Burnham unveiled a £210 million package aimed at regenerating communities, coupled with a Prime Ministerial pledge to “restore pride and bring hope back” to high streets by revitalising vacant shopping centres, disused cinemas, and other local eyesores.
The proposed tax shifts reflect ongoing efforts to reconcile the increasingly digital nature of commerce with the traditional retail environment and the broader economic implications for community regeneration.
