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Online retail giants could face 'double tax' in UK on pandemic profits

Lucy Harley-McKeown
·3-min read
An Amazon package is seen on a delivery truck in New York City, New York, U.S., March 17, 2020.REUTERS/Jeenah Moon
Companies in danger of being hit with the COVID-19 windfall tax include big supermarkets, food delivery companies Deliveroo and Just Eat, online grocer Ocado and clothes retailer Asos as well as Amazon. Photo: REUTERS/Jeenah Moon

Online retail giants and other companies that have reaped the rewards of shifts to online made due to the coronavirus pandemic could face a double tax bill in the UK.

According to emails leaked to The Sunday Times, Amazon (AMZN) and tech firms are among companies summoned to a meeting this month, to discuss how an online sales tax might work.

The taxes would aim to plug the black hole in the UK’s finances caused by borrowing to support jobs and the economy amid widespread lockdowns.

The Times said the Downing Street policy unit is also looking to impose an “excess profits tax” on companies that saw a surge in profit as a result of the crisis.

Retail sales made online jumped over the course of the last year. According to the British Retail Consortium and KPMG, excluding food the proportion of purchases made online rose from 31% to 46%.

Companies in danger of being hit with the COVID-19 windfall tax include big supermarkets, food delivery companies Deliveroo and Just Eat (JET.L), online grocer Ocado (OCDO.L) and clothes retailer Asos (ASC.L).

A Treasury spokesman said in emailed comments: “We want to see thriving high streets, which is why we’ve spent tens of billions of pounds supporting shops throughout the pandemic and are supporting town centres through the changes online shopping brings.

“Our business rates review call for evidence included questions on whether we should shift the balance between online and physical shops by introducing an online sales tax. We’re considering responses now.”

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A digital sales tax has been rumoured for many months but the details of it have always been hazy. In July last year, reports emerged that chancellor Rishi Sunak was allegedly mulling a similar proposal.

The proposals came to light as part of a business rates review call for evidence published by the Treasury. At the time, it said it would “consider all elements of the current system, as well as exploring the potential strengths and weaknesses of alternative property and online taxes put forward as possible replacements for rates.”

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Now, with a new US leadership in president Joe Biden, digital sales taxes might seem like a more viable diplomatic option.

Over the course of 2020 the US government under president Donald Trump hit back at plans from multiple European countries to impose a digital sales tax due to how many massive US corporations would be stung by such a levy.

Back in January 2020, the UK was asked to pause its planned 2% tax on the sales of search engines, social media companies, and online marketplaces, which would have come into effect from April this year. This was in line with France.

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The UK’s initial digital tax move came shortly after France imposed a new law last year. It was set to retroactively go into effect from early 2019 and would apply to any digital company with sales of more than €750m (£685m, $878m), in which 30 companies are expected to be affected.

US treasury secretary Steven Mnuchin had previously hinted at possible tariffs on the UK if it presses ahead with plans for a tax on “big tech” companies.

A report in 2019 accused six US tech firms — Amazon, Facebook (FB), Google (GOOG), Netflix (NFLX), Apple (AAPL) and Microsoft (MSFT) — of “aggressively avoiding” $100bn of global tax over the past 10 years by moving sales and profits through low-tax countries such as Bermuda, Ireland, Luxembourg, and the Netherlands.

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