John Healey is preparing to announce a £1bn tax crackdown on online marketplaces like Amazon and Temu to fund tax cuts for high street shops.
At the Budget later this month, the Chancellor is expected to make e-commerce platforms like Amazon, Ebay and Temu responsible for collecting tax owed by the sellers using their site, the Times has reported.
The Treasury is expected to use revenues from this policy to fund business rates cuts for high street retailers, a move which has long been pledged by Andy Burnham.
This trade-off is likely to be welcomed by retail bosses, who have been ramping up pressure on the government to cut the industry’s soaring tax bill, naming business rates and employment costs among their biggest burdens.
The Chancellor is set to make online marketplaces responsible for collecting VAT at source for each of its sellers whose annual revenue is more than £90,000.
This crackdown will seek to address concerns that foreign retailers are setting up UK shell companies to avoid paying VAT.
Healey will come under pressure to set this threshold lower. Dan Neidle, the founder of Tax Policy Associates, told the Times that this loophole will still be exploited unless the Treasury comes down harder.
“This is a step in the right direction but the Treasury needs to go further and make online marketplaces responsible for collecting every penny of VAT on the sales made on their platform.
“Unless that happens these Chinese sham companies will find just another way around the rules.”
Healey rows back from warehouse tax
During his campaign to become MP for Makerfield, the Prime Minister pledged to exclude 140,000 small high street retailers from business rates to give them “the chance to thrive”.
Burnham had suggested he would hike tax on “out of town” warehouses to pay for this tax break, but retail bosses had been fiercely opposing this proposal.
Hiking tax on warehouses would inevitably push up costs for the retailers using them, eventually resulting in higher prices for consumers, industry leaders had warned.
John Lewis executive chairman Jason Tarry said last week that a warehouse tax would “reveal a fundamental misunderstanding of how modern high streets work”.
The Chancellor is said to have now ruled out a warehouse tax, and his decision to instead pursue online sellers will likely play well with retail bosses, who have often argued that the high street is over-taxed compared to their e-commerce rivals.
Amazon told The Times that it supported the crackdown on online retailers, which it estimated would raise about £700m for the Treasury – lower than the government’s own estimates.
An Amazon spokesman said: “Closing this loophole will raise significant revenue for the exchequer and simplify compliance for both HMRC and legitimate sellers.”
A Treasury spokesperson said: “As has always been the case, decisions on tax are a matter for the chancellor to set out at fiscal events.”