A new tax on internet giants’ sales is not expected until the Autumn, if at all – despite Brits facing stealth hikes in this week’s Budget.
Wednesday’s statement is tipped to freeze income tax thresholds for three years, removing a planned tax break from April for all Brits who earn over £12,500.
But it’s understood an ‘online sales tax’, which could hit giants like Amazon whose profits soared in the pandemic, will not be announced by Chancellor Rishi Sunak in his Budget.
Instead the idea is part of a wider review of business rates, which has been delayed due to coronavirus.
While an interim report on that review will be published on March 23, a senior government source said there will be no final action on any online sales tax until the Autumn.
Even then, there is no guarantee an online sales tax will definitely be introduced. A Treasury call for evidence last year warned it could simply lead to costs being passed on to customers or “distort” sales.
Chancellor Rishi Sunak defended his record today, insisting the government had already introduced a 2% “digital services tax” last year on some firms’ revenue.
But critics say the digital services tax does not go nearly far enough and point out firms like Amazon have seen their profits soar.
Mr Sunak said he was talking to G7 and G20 ministers to try to find “international agreement” on how to tax web giants “properly”. “That can hopefully replace our own digital services tax,” he told the BBC.
The Sunday Telegraph suggests the March 23 proposals could include a move towards a tax on each parcel delivery made by online firms.
The Chancellor could also still introduce a separate ‘windfall tax’ in his Budget on firms that have made huge profits during Covid, from Amazon to supermarkets.
But reports today – which the Chancellor would not comment on – claim Mr Sunak is moving away from the idea.
Meanwhile however, Mr Sunak refused to rule out a “stealth” tax raid on working Brits as he tries to stem the £280billion of spending on the pandemic.
The Income Tax-free personal allowance – currently £12,500 – was due to rise in April for the first time since 2019.
Bur reports suggest the Chancellor is plotting three years in a row of freezes – saving the Treasury £6bn.
While the allowance would have only risen to £12,562 this year, saving a family just £12.50 in tax, that would have “baked in” bigger rises in later years.
The threshold for paying 40% tax had also been due to rise from £50,000 to £50,250 in April, saving wealthier families £62.50 in the first year and more in future years.
An interim report on the business rates review will be published on March 23.
It will include a summary of responses from industry together with tax documents, fresh consultations and new calls for evidence on a “wide range” of tax-related issues.
Shadow Chancellor Anneliese Dodds accused Mr Sunak of a “short-term” plan to get tax hikes on families out the way to clear the way for the 2024 Tory election campaign.
Highlighting the business rates review had been pushed back, she told Times Radio: “He’s not actually grappling with those issues – but he does seem to be very keen to increase council tax for families”.