After what seems like an age, but is in fact just over a couple of months, the Governments consultation into an “Online Sales Tax” closed on the 20th May.
During that time we have devoted quite a lot of time to the topic, writing blog pieces, hosting drop-ins, attending roundtables & forum discussions and sending out a member survey. And yet we have (kind of) ended up where we started, with no clear indication of consensus other than what we largely agreed about at the outset.
Of course, it is easy to throw that statement out there, so what I thought I would do is examine the process in a little more detail to backfill it with a little context. Let’s start close to home.
MIA Survey
The actual consultation document itself was fairly lengthy, and the questions posed were both specific and technical, so we decided the best route would be to use a more accessible template to capture industry feedback. We launched this on the 25th March and you can find it here
We had a reasonable response to the request, but overall very little consistency in terms of the opinions offered. For example on the fundamental question of ‘In principle do you support the concept of some form of online sales tax as a means to offset retail business rates?’ There were 38.5% responses in favour, 38.5% against and 23.1% said ‘it depends’.
Similarly when asked ‘What proportion of your sales customers do you expect to be online now, in 3 years and in 5 years’ the range of answers literally went from 0 to 100%. In some cases the proportion increased and in other cases the proportion remained fixed over the five years period.
Where there was some consistency was on the scope of an OST. 80% of those surveyed believed it should be applied to physical goods sold in a B2C model, 50% thought it should apply to digital goods (such as ebooks or video games) sold B2C and but only 30% thought it should apply to digital services. Only 20% thought it should apply to B2B sales.
Finally one of the most widely agreed responses was on the channels that should be in scope for an OST. 80% thought it should apply to sales transacted on third party platforms & marketplaces (such as eBay or Amazon Marketplace), 70% for sales transacted online and delivered to customers and then below 50% for telephone sales, click and collect, and sales made through apps.
Independent Retail Consortium (IRC)
Moving on, the MIA has also been involved in a similar discussion process with the IRC. The IRC represents a number of sectors with a similar profile of small independent resellers such as Booksellers, Jewellers, Bicycle Shops & Greetings Card Retailers.
By combining member survey data based on the same sample questions we were able to produce a report that represented a cross section of the views of independent retailers. As you would expect it was an equally mixed bag of responses – the key findings were as follows;
- There is no consensus view from across independent retailers about the introduction of an online sales tax
- The majority of our bricks and mortar retailers welcome the idea of OST offsetting business rates costs, which significantly impact their physical premises, but not at the cost of stifling their future online sales
- If an online sales tax was to be introduced a sufficiently high qualifying threshold needs to be applied, starting at £2million of online sales
- Click and Collect services must be exempt from the online sales tax because of the important role they play in driving footfall to shops and town centres.
You can read the full submission here
British Retail Consortium (BRC)
Finally we get to the BRC. The BRC represents pretty much the bulk of the national chains you would expect to see in town and city high streets, shopping malls and out of town retail parks, as well as most of the supermarkets.
I attend a closed CEO group meeting hosted by the BRC a couple of times a month and it would be fair to say that the debate around this topic has been lively. Certainly a lot of opinion has been expressed, but again there is very little consistency around the structure any form of OST should take.
The BRC has produced a very detailed submission, which you can read here
What do we know
As I said at the beginning most of the things we initially agreed on are still broadly intact. The submissions from both the IRC and the BRC agree that the current model of taxation via Business Rates urgently needs addressing and is definitely not appropriate for developments in consumer behaviour.
The idea that an Online Sales Tax should be introduced to rebalance the inequality created by an existing tax (Business Rates) also seems counter-intuitive.
And any form of OST will involve lifting the lid on a huge can of worms, the sheer breadth of options available to the digital consumer will mean any proposal will be very complex and costly to implement and maintain.
You can make the argument that the whole process was merely a can-kicking exercise, and I think there is some truth in this opinion. The debate has certainly been animated, and understanding the complexity of the challenge has been useful but in terms of the journey, I am not sure we have moved in any particular direction.
