Chancellor Rishi Sunak will wait until the fall, according to government officials, before deciding whether to introduce a UK online sales tax to improve the playing field between high street and online retailers.
Sunak wants to wait for President Joe Biden's US administration to announce whether it will support efforts to reform global digital tax rules led by the Paris-based organization, OECD.
On Tuesday, the Chancellor will publish a series of tax consultations as well as a summary of responses to a review of future corporate rates. Sunak is considering reforming the commercial property tax at the same time as introducing a possible tax on online sales.
The business is deeply divided over the benefits of an online sales tax – not least because many retailers sell their products online as well. Most retailers would advocate simply lowering business rates.
Sunak will postpone all decisions about an online tax and the outcome of the corporate rate review launched in July last year until the fall, officials said.
The Chancellor's allies said he would see if Janet Yellen, U.S. Treasury Secretary, would support a global approach to taxing digital services. The G7 summit in Cornwall in June is seen as a key moment.
"The US has already shown some movement on this, so we'd like to spend a little more time on it," said a UK tax official.
The UK launched its own limited digital services tax in April 2020, aimed primarily at large multinational companies, which is expected to raise around £ 500m by the end of Parliament.
A separate online sales tax would hit a lot more businesses. A 2 percent levy on goods purchased online could bring in £ 2 billion each year. Business tariffs are an important source of income for Sunak and generate around £ 30 billion.
The release of the Treasury Department's responses to the store tariff review will confirm that many retailers are looking to lower their tariff bill instead of a new tax on online retailers.
Institute of Directors chief economist Tej Parikh said the pandemic had "only reaffirmed the distorted playing field between online retailers and brick and mortar businesses," adding, "It is critical that the government find a way to address the sky-high exposure To decrease rates at our highs. " Road while being careful not to undermine digital growth. "
The UK Retail Consortium, a trade organization, said the key principle should be that retail is an overwhelmed industry and that it should not incur any additional net tax burden.
The OECD is conducting a multinational negotiation to modernize the international tax system through two new measures: One aims to introduce a global minimum corporate tax rate.
The other would allow countries to tax some of the global profits of multinational corporations based on the location of the company's customers, even when sales are made remotely.
This move, which will hit mostly US tech giants and European luxury goods companies, has been hugely controversial and the US halted negotiations under Trump's presidency last year.
Recent moves by the Biden administration have sought to soften US stance, but tax experts suggested that the delay in the UK Chancellor's decision on an online sales tax decision was due more to national pressure than international concerns.
Dan Neidle, partner at Clifford Chance law firm, argued that the UK online sales tax plans were "all about increasing revenue" and would not hit the same businesses as the OECD proposals as they target multinational tech giants.
"The OECD process would not tax Ocado or Sainsbury as they are domestic companies that pay taxes in the UK. But it would," he said.
Heather Self, a partner at Blick Rothenberg, an accounting firm, suggested that the Treasury Department was using the OECD negotiations as "cover or excuse" for difficulties in reforming UK business rates.