Seriously, at least try to get this right

Right now, the Treasury is having another go. As the Telegraph reported on Monday, the Treasury is revving up plans for an online sales tax as part of a package of measures to reform, and hopefully even reduce, business rates.

The online sellers would pay a bit more, and in return physical high street shops would have to pay a bit less. True, we can understand the arguments for that.

An online sales tax is not a tax upon online retailers. It is a tax upon online consumers.

Tax incidence is the study of who really pays a tax. The wallet of which live human being gets lighter as a result of the existence of the tax?

For business rates this is landlords. For a sales tax this is consumers.

At least try to get the basic economics right on the business pages.

21 thoughts on “Seriously, at least try to get this right”

  1. What is meant by online selling? Is this sales that are not made in a bricks & mortar shop? In which case, does it include mail order & telephone sales? If not, how do you distinguish sales made over the regular telephone network from VOIP? Or using e-mail or Whatsapp?. It’s not very hard to think of a way round this. One selects the goods one wants on the seller’s website. The seller e-mails a pro-forma invoice & one e-mails back a purchase order with card payment details. Much the same could be done with Whatsapp. Could even be done with a voice call.
    Is click & collect online selling or not? If not, is collecting from the seller’s premises different from collecting from the seller’s agent’s premises? Are premises distinct from a delivery van?
    What makes a bricks & mortar seller. One shop? The proportion of sales made over the counter? Is this a tax on physical products not services? One can make all sorts of physical products services with a degree of ingenuity.
    Barking.

  2. This is why that scum Biden is singing the “Global Tax Agreements” cockrot. Because without that countries who don’t have any such crap will become sales centres.

    And might still be even with such agreements. Doubtful Putin would sign and Xi would do so only cos of his power trip. Were Xi deposed any new CCP scumbag might decide for cash rather than commie tyranny.

  3. Bloke in North Dorset

    bis,

    Good points, but based on the assumption that they are trying to raise tax revenue. Perhaps that isn’t the real aim? All the measures you propose put up the cost of the online sellers and thus reduce profit online margins, forcing them to raise prices and narrowing the advantage over high street retailers.

    Those high street retailers make large payments to party funds, even the smaller ones through collective action via associations etc. I’ll also bet that there’s been a lot of polling that shows that this will be popular with voters.

    So, whatever happens: increased tax revenues, increased popularity with voters, increased donations to party funds from high street retailers etc, the government will be winners and we will be the losers.

  4. “All the measures you propose put up the cost of the online sellers and thus reduce profit online margins, forcing them to raise prices and narrowing the advantage over high street retailers. ”

    Hardly BiND. Pretty well all the strategies I’ve mentioned there are possible to automate. So you’re talking a one time trivial cost of implementing.
    Think of something like a telesales order. The online session results in a proforma invoice. The card details are registered with the seller. The seller then autodials the purchaser who says or keyboards in the invoice reference. That’s a telesale not an online purchase. If they’re going to tax telesales, then a lot of bricks & mortar stores will be paying it because a lot of sales are not made in-shop.

  5. I propose a new tax on high street retailers, to subsidise those poor online retailers’ delivery costs, something the high street shops can avoid.

    In reality, this is just a scam to bleed Amazon’s customers. Though trying to enforce it on a US company may be entertaining.

  6. So much wrong with this hard to know where to start. All the implementation mechanism issues as BiS raises above, although if it’s truly intended to help legacy retailers presumably it could be levied on all sales and allow deductible for costs that favoured retailers disproportionately incur (business rates, rent perhaps)…

    But why do we even want to do that? Online are providing something we clearly want at a price we’re clearly happy to pay. Why on earth do we want to penalize that ?

    Adds complexity, and costs. Ultimately that makes us all poorer. Those with lower income disproportionately so.

    Should we tax food sold in a supermarket but not in a grocer/butcher etc? Supermarkets have given us a choice we’re happy with, at a better price. We’ve voted with our feet. So what if we’re now doing the same with online ?

    Heading towards the model of who best buys the government best succeeds in business. This does not seem a healthy direction of travel.

  7. Wouldn’t it be simpler to raise business rates on warehouses? Obvs, it’s more useful to lower business rates all round but the govt has to put its shovel somewhere.

  8. As far as I can see its just a tax raid. If you actually wanted to balance online vs high street you’d tax the online sales and reduce the business rates on everyone to compensate. Then a high street shop with no online presence would gain the most, a high street shop with some online sales would gain a bit less, and a purely online business would probably lose out overall. Amazon et al would lose big time of course.

    But its been made quite clear that Rishi Sunak has no intention of reducing business rates to compensate for the online sales tax, so the whole thing is just a revenue raiser, ie a tax rise on the consumer.

  9. The Original Jonathan

    How would it impact the lady in the shop downstairs from me? She uses her shop as a shop and as an online sales warehouse. Her shop is on our local high street, she sells to customers who come through the door, and customers who order online – she’s probably single-handedly keeping the local post office in business.

  10. @Jim
    But I can’t see how you can define an online sale. “Online” is just a means of communication. There’s a whole lot of retailers who rely on communication for sales. If you’re going to define a shop sale as something bought when the customer’s physically present in the store, you’re going to exclude a whole lot of purchases not bought that way. Anything physically too large for the customer to take away, for a start. That’s often done by communication. So how do you define the communication to separate it from online? How do you define online to separate it from other methods of communication?

  11. BiS

    It’s anti- Amazon, inspired by our European “friends”, is all. Don’t look for competence or consistency..

  12. “But I can’t see how you can define an online sale.”

    You don’t need to define what every sale is, you just set a bar for online sales as a % of all sales, and say anyone above this level is an online retailer and all sales must charge 2% OST. You’d probably set it fairly high, 80%+ I’d say. Thus Tesco would probably remain a bricks and mortar seller and not have to charge OST even though it sells a decent % of sales (c. 15%) via its website, but Amazon would fall foul, having no walk in shops at all (yet). And unless Mrs Miggin’s Dress Shop became very popular online she’d not have to charge it either.

    The bigger issue I can see is what about B2B transactions – there are plenty of businesses who are online but largely supply businesses, will they all have to charge 2% as well? Isn’t that going to cascade down the supply chain, adding 2% at every level? VAT obviously nets off input and output VAT against each other, would the same apply for a business who has to pay 2% on some of its inputs and charge 2% on some or all of its outputs? If you exempt B2B transactions how does that translate to dealing with a business buying its new laptop from an online seller?

  13. “’Online’ is just a means of communication.”

    Of course it is. But the term encompasses an unfamiliar form which the people who think they’re in charge don’t understand. Which is why you’ve got Priti Patel blithering on today about how David Amess being stabbed means we should all be forced to prove who we are when talking to each other “online”.

    Rule of thumb with such stories: remove the “online” bit and see if it makes any sense. I was about to say that this is just one step away from requiring an ID card to chat to people down the pub, but then… yeaaaah…

    This country’s rapidly heading round the U-bend.

  14. We should have a sweepstake/raffle thingy.

    How many minutes after this OST is introduced will Amazon add to the “Buy Now (with OST)” button, another button that says “Request proforma invoice via email for non-online order placement”.

    It isn’t policy making, it’s virtue signalling. Expect the idea to be quietly dropped when reality dawns. See: windmills and green is good gibberish from Coco the Clown.

  15. The Original Jonathan

    Sam, remove the “down the pub” bit and you’ve got it spot on. That’s exactly what our “betters” want, enforced requirement for you to have state permission to talk to somebody, full stop.

  16. Who pays rates, business or domestic, depends on market conditions. MrsBud and I are evil Rackmanists with domestic and business properties. There is a massive shortage of rental properties at present in Queensland. Accordingly, every six months we up the rent by 4-6%, in marked contrast to two or three years ago when we had to slash rents. Tenants have to accept the situation because if they don’t, there are half a dozen other people willing to pay. You have to take advantage, just as when demand is low, tenants will exploit the over supply and force you to accept low rents.

  17. @Doc Bud
    Of course, that’s the answer for the UK. Retail properties, due to competition with on-line, are now worth less so rents should fall. Lower overheads makes bricks & mortar more competitive.
    But UK is far too overinvested in the great God property. Heaven forbid those “invested” in property should suffer.

  18. Most UK (business) property is own by some type of investment fund. And property investment managers are incentivised to allow properties to remain empty* rather than reduce rents, which reduces the book value and hence their bonus.

    * or possibly (for smaller shops) a charity tenant on a rent-free ‘introductory’ period.

  19. The biggest impact on high street retailers is from out of town shopping centres
    So I propose an out of town sales tax, say 10% to compensate and support the high streets retailers that are apparently totally vital to our way of life (albeit not so vital that anyone uses them)

    Taxes on innovation to support luddism , when did I vote for that?

    Btw, online retailers are simply avoiding the piles of over regulation and predatory councils that impact the high streets, why not tackle that?

    Personally I think this is kite flying

    Amazon is far too clever and agile to worry

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