The Government has launched a consultation exploring the proposal of an online sales tax (OST) to "rebalance the taxation of the retail sector between online and in-store retail".

Published on 25 February 2022, the Government's proposal seeks answers on what form an OST should take and how to define an online sale.

If implemented, an OST would be used to reduce business rates for retailers with properties in England.

Proponents of an OST say in-store retailers pay a disproportionate share of business rates, making brick-and-mortar businesses less competitive.

The pandemic has accelerated the growing share of online sales, with online sales accounting for 22.9% in March 2020 and 29.6% in December 2020.

John Cullinane, director of public policy at the Chartered Institute of Taxation welcomed the consultation "given its impact potentially on millions of people".

He added:

"We would like the Government to be clearer about the objectives of the online sales tax.

"Is the Government content that while evidence shows that business rates today are ultimately mostly borne by landlords, the online sales tax would be very largely borne by consumers in higher prices?"

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