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The Chancellor should consider a fairer system to the rates to save the High Street – a Digital Services Tax may not be the answer

A Digital Sales Tax levied on the online sales of large retailers such as Amazon is being mooted as the saviour of the British High Street. However, it may end up accelerating the decline, says Mark Hart.

A review of the current system of business rates is necessary as it is based on out-of-date values for retail property and is unfair as those operating from traditional bricks and mortar premises bear a higher cost than those online retailers operating from warehouses.

However, a Digital Services Tax (DST) levied at 2% on the online sales of all retailers will adversely affect those retailers with both an online and bricks and mortar presence. These tend to be the anchor retailers such as John Lewis and Next, which High Streets use to attract smaller traders. Data indicates that these retailers would be disproportionately affected which could reduce the number of stores on the High Street.

A DST based on turnover also does not address a business’ ability to pay as it does not consider the profit margin on that sale.

A fairer system would be an increase in Corporation Tax to supplement a reduction in the rates. Afterall implementing a DST requires coordinated international response to target those large retailers like Amazon who can bypass national efforts.

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