The Treasury is considering “different ways of taxing” online companies, a minister has revealed.
The Centre for Retail Research has predicted 10,000 stores will close this year alone. That is estimated to result in the loss of more than 380,000 jobs over the next four years.
In debate on business rates in Parliament yesterday, concerns were raised by MPs about the demise of high streets as consumers increasingly do more shopping online. The impact this will have on councils, which are becoming increasingly reliant on business rates income to fund services, was also raised.
Finance secretary to the Treasury Mel Stride acknowledged “the online business threat” and the fact successful online ventures might not necessarily pay as much in business rates as companies with shops and offices in town and city centres.
He said: “There is a growing number of online businesses in this space, and an increasing number of purchases are happening through online companies.
“It is important to make the point up front that when we refer to some of those companies paying relatively small amounts of tax compared with high street operations, we are talking not about tax avoidance but about whether the way the international tax regime operates is appropriate or functional for the 21st century. It is not.
“We need to find different ways of taxing online platforms, whether they are search engines, social media platforms that generate revenue, or online marketplaces, where significant value generation occurs through the relationship between users based in the UK and the platform itself.”
Mr Stride was asked if there is a team in the Treasury looking at different ways to tax online companies.
“There is indeed,” he said. “I am personally engaged in that matter, which has been taken up at the OECD [Organisation for Economic Co-operation and Development, an intergovernmental forum] and the European Union.”
It has been suggested “some kind of revenue-based taxation” could be introduced, although he warned that could “choke off new entrants to the marketplace, which may be loss-making, so there may have to be some de minimis thresholds associated with that formula”.
However, he added: “We are actively pursuing that on a multilateral basis with countries in those two institutions. I discussed exactly this issue with finance ministers from OECD countries at the ministerial meeting of the OECD in Paris last week.
“We have made it clear that, although it would be most beneficial to move multilaterally with other countries, we will make a unilateral move if we need to.”
Local government minister Rishi Sunak was asked in an LGC interview last month if the full localisation of business rates was a poisoned chalice in the digital era when the value of premises often no longer indicate the profitability of a firm. Mr Sunak described business rates as an “easy to collect, easily identifiable tax which has remained relatively stable”.
However, he said: “In the short to medium term there’s going to be no major change to that but there’s a broader, longer-term question about our taxation system overall, not just business rates but corporation tax… In a digital age is our tax system set up in the right way?”
Mr Sunak said reforming council tax through additional property bands or revaluation is “not on the agenda” as taxpayers think bills are “high enough already”.