Tax experts have challenged the Government's proposals for an online sales tax (OST) as a way to fund new business rates relief.

The Government started an open consultation on the tax earlier this year to work out what form an OST should take and when it would apply to an online sale.

It said the purpose of an OST would be to "level the playing field" between online and physical retailers by diverting the revenues of the new tax to business rates relief.

However, the Chartered Institute of Taxation (CIOT) and Association of Taxation Technicians (ATT) have both expressed their concerns about the plan.

ATT doubts an OST is the best way to address business rates and warned the complexity of a tax on digital sales would prove a headache for businesses.

Gabby Donald, chair of CIOT's indirect taxes committee, said:

"We strongly suspect that a decrease in business rates for eligible high value retail shops will be simply offset by an increase in the landlord's rent, effectively undermining the purpose of the online sales tax - so bricks and mortar retailers are no better off and online consumers will suffer increased prices."

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