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The government has said it wants tax principles to apply fairly to both online and bricks and mortar retailers and it does not support an online sales tax.
In a letter responding to online retailers who had warned against such a tax, David Gauke, the Exchequer Secretary to the Treasury, said the Government did not favour a specific tax aimed at the online business sector.
An online sales tax had been proposed by retail chiefs such as Morrisons chief executive Dalton Philips, who believes that a new tax could help bricks and mortar stores compete in the face of rising business rates.
In the letter, responding to online businesses such as Ocado and Boden, Gauke said: "The Government recognises that online businesses contribute to growth in the UK and supports continuing success in the sector. Many online businesses operate across international borders and it is therefore important to have international agreement on the principles of how multinational businesses, including online, are taxed. However, we favour an approach which aims to ensure common principles apply to all businesses whether operating online, from physical premises or with a combination."
He added: “This area is extremely complex; with large parts of the economy moving towards having some form of digital presence, it is important to ensure fair competition between digital and non-digital businesses.”
Helen Dickinson, director general of the British Retail Consortium, responded to the letter, and said that tax principles must be applied fairly, as long as they are still relevant. She said: "The whole question of an online tax has had a lot of coverage but it’s not the place to start. It’s important that common principles should apply to all businesses—but the principles that apply at the moment are from a bygone age.
"Business rates in particular have long since ceased to be fit for purpose.”