eCommerce companies that profited during the COVID-19 pandemic could face a new tax to help the UK pay its debts.
Amazon and other major online retailers could be struck with a new online sales tax as the UK government seeks to pay back debts incurred by record pandemic borrowing.
According to reports, chancellor Rishi Sunak proposed the measure following a consultation last year. The tax has been dubbed the “Amazon tax”, reflecting the historic surge in profit the eCommerce company experienced during the COVID-19 crisis as online shopping replaced many avenues of traditional retail.
The rumoured move also comes on the back of reports showing that Amazon’s UK sales increased 35% to almost £20 billion in 2020, yet the company only paid 3% more in UK corporation tax.
The idea has garnered some support among brick-and-mortar retailers, with Tesco, Asda and 16 other companies and interest groups writing a letter to Sunak to express support for stricter taxes on online retailers. The group proposed a permanent reduction in business rates and a new measure to bring online sales more in line with traditional retail.
"Reducing business rates for retailers and rebalancing the tax system to ensure online retailers pay a fair share of tax would be revenue-neutral, provide a vital boost to bricks and mortar retailers and support communities in need of levelling up,” the letter suggested.
Separate from the letter’s proposals, Tesco called for a 1% levy to be placed on major eCommerce players to create “a level playing field for all retailers, online or physical”.
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Investor optimism in online fashion giants ASOS and Boohoo fell as reports of the potential tax spread over the weekend. The companies’ shares fell 2.5% and 4.6% respectively on Monday trading.
Chancellor Sunak is not expected to propose the tax during his 3 March budget, where he will instead look at extending the furlough scheme and the current business rates holiday.
