In a sector of the UK economy where margins can be incredibly tight, the imbalance can have a significant impact on a retailer’s margins and be a critical factor as to whether a retailer flourishes or struggles. The concept of an online sales tax emerged as a potential solution to address this imbalance and attracted opinions from various commentators – with most hoping that the introduction of such a tax would enable the amount of business rates paid by high street retailers to be reduced.

In February 2022 the Government began consultations with the retail industry to further consider the advantages and disadvantages of the introduction of an online sales tax and whether it would bring about the desired rebalance to the sector.

The Chancellor has now confirmed in his Autumn statement that the Government has reached a decision and ruled out the introduction of an online sales tax. The decision reflects concerns raised about the complexity of an online sales tax and the risk of creating unintended distortion or unfair outcomes between different business models. Further information as to how the Government has reached this decision, including the response to the consultation, is expected to be published in due course.

Ruling out the introduction of the tax leads to the question of what alternative action (if any) the Government will take to help prevent the decline of the UK’s high street and rebalance the UK tax system to fairly reflect modern consumer’s shopping habits.