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UK sales tax: to be or not to be?

A number of UK retailers are calling for a UK sales tax to be imposed on those not paying their 'fair share' of corporation tax but is it really feasible?

A row has erupted between the high street and online retailers as each takes a different stance on a potential UK sales tax which would be imposed on online businesses to ensure they paid their 'fair share' of corporation tax. But the chief executives of online behemoths including groceries giant Ocado and clothing retailer Boden have dismissed the idea as 'nonsense' in a letter addressed to the Chancellor George Osborne.

The online businesses have argued they are providing jobs and a revenue boost to the economy and argue they should not be penalised or 'choked' for doing so.

However, several high street retailers, including Sainsbury's and Topshop's Philip Green, have called on the government to overhaul the business rate system. Justin King, head of Sainsbury's, argues that a gulf exists between bricks-and-mortar retailers and online sellers who have a wider arena in which to play and should face a tax system similar to the US which enforces special rates on online businesses.

The British Retail Consortium has urged the two sides to stop fighting and try and find 'common ground.'

George Bull of tax firm Baker Tilly has warned that as long as Britain is a member of the EU it is banned from introducing any taxes, duties or charges that could be characterised as turnover taxes.

Bull also pointed out that the VAT regime is now largely harmonised to ensure consistency in the internal market, with EU member States able to have discretion over important areas including VAT rates and how they control and collect VAT from their registered taxpayers. He recommended that the British government look to work with OECD which has highlighted the problem of a digital economy to come up with a solution which fits with existing legislative permissions.

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