Digital Services Tax extended to include 2% ‘Amazon tax’

High streets government minister, Jake Berry, has promised to extend the Digital Services Tax to include a “2% tax on online retail” to save Britain’s high streets.

Berry confirmed that the tax, announced at last October’s Autumn Budget, would be extended to online retailers saying if the government cannot secure international agreement “we will come forward with our own 2% tax on online retail to ensure that we can continue, as we did in the last budget.”

Under the Digital Services Tax, media firms and search engines are to pay 2% tax on advertising revenue while online marketplaces will pay tax not on the payment from the consumer, but on the “platform fee”. The initial plan sought to exclude online retail but Berry’s comments imply it will now be extended.

The news comes after the chancellor Philip Hammond signalled that the government was listening to the complaints of retailers as he said: “We want to ensure that taxation is fair between businesses doing business the traditional way and those doing business online.”

Robert Hayton, head of UK business rates at real estate adviser Altus Group added that the minister’s commitment was “unequivocal” but pressed for its introduction at the Spring Statement on 13 March in order to avoid “further deterioration of high streets” and added “the additional tax raised must be ring fenced to provide for a fairer distribution of the overall revenue.”

Hayton said: “Traditional bricks and mortar retailing is obviously property intensive with the reliance on property leading to a larger tax to turnover ratio compared with online only. Traditional retail accounts for £17.12bn of the overall £66.55bn rateable value for all sectors in England and Wales which forms the basis of how business rates bills are calculated.”