Question 17: Do you agree that an OST would be levied on vendors?
- We consider that the logic of a sales tax is that it should be levied on vendors.
Question 18: How should different intermediaries that sell online on behalf of other businesses be treated with respect to an OST i.e. online marketplaces, franchises, auctioneers, agents and commissionaires?
Question 19: Are there situations in which it is not possible to distinguish the vendor from the intermediary, or in which the intermediary plays a crucial role in the sale? How should these be treated?
Question 20: Are there circumstances in which it would be appropriate for an intermediary to be liable for an OST, rather than the underlying seller? What are these?
Question 21: How would an OST define UK customers?
- The consultation document suggests that it should be possible to tell these by UK delivery addresses; this seems sensible.
Question 22: Should UK-based intermediaries play a role in identifying taxable transactions or be made liable in some cases?
- The consultation suggests that one way to mitigate the difficulty for overseas businesses could be to involve intermediaries such as marketplaces or platforms, as discussed above.
Question 23: Would either a revenue or a flat fee approach have a greater distortive impact on consumer behaviour? What are the scope and design considerations that would lead to distortion caused by both models?
Question 24: Would either approach be particularly preferable? If so, why? Are there any preferences around scope (i.e. different exclusions or exemptions) which would make one of the approaches more preferable?
Question 25: Do you have experience to share of overseas' taxes on online sales using either model, or similar approaches not covered above?
- As we said in our reply to the business rates call for evidence, we consider that if it was introduced at a relatively low level that this would be a low risk of a having a distortive effect on consumer behaviour. We would see a revenue as opposed to a flat fee approach as less regressive, this was the approach modelled by WPI Economics in its work for the LGA referred to above.
- The Indian equalisation levy would appear to be a model from overseas, particularly their definition of e-commerce as:
- (i) online sale of goods owned by the e-commerce operator; or
- (ii) online provision of services provided by the e-commerce operator; or
- (iii) online sale of goods or provision of services or both, facilitated by the e-commerce operator; or
- (iv) any combination of activities listed in clause (i), (ii) or clause (iii);
- However, there are some ways in which the proposed OST would differ from the Indian equalisation levy, for example the latter is only levied on foreign e-commerce companies.
Question 26: What factors should be taken into consideration in setting an allowance? How would this differ for revenue and flat-fee models of an OST?
Question 27: What would be a reasonable OST threshold and allowance to set in order to protect small businesses while also making sure the OST generates sufficient tax revenues?
Question 28: Do you agree that an OST threshold or allowance should apply once to all businesses under common control?
Question 29: Do you agree the threshold or allowance would apply to individual businesses when they operate franchises or sell through online marketplaces?
- We note that the consultation suggests a threshold of £1-2 million of taxable sales or additionally a number of online orders. According to the ONS E-commerce and ICT activity, 2019: (published 5 February 2021) firms of over 10 employees account for over 96 per cent of total e-commerce sales so that might be seen as a suitable threshold. An alternative (and in most cases lower) threshold would be to consider using a VAT threshold. Businesses should not be allowed to divide themselves up into smaller units to be below the tax threshold.
Question 30: Do you consider there to be strong arguments either for or against quarterly or annual reporting? If this hinges on any of the design options laid out in this consultation, please specify which options and why.
Question 31: Can you provide insight into the overall burden to administer all systems and processes required to support an OST? Do systems currently allow you to identify the features listed above; if so, please provide further details on how this distinction can be made.
- Businesses are best placed to answer these questions, but we note that the consultation suggests that the preferred option would be in line with VAT where it is quarterly for most businesses.