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Will the UK budget include an e-commerce sales tax?

Rishi Sunak could introduce a UK e-commerce sales tax in his forthcoming budget, according to reports. The Telegraph quotes a government source as saying that the plans are still ‘rudimentary’ but there is clear impetus towards some kind of tax on electronic sales. It is unclear whether an online sales tax will be included in the forthcoming Budget. According to reports, other sources suggest that the government would consult with tech businesses before implementing an online sales tax. 

Creating a level playing field for retailers

While details of the possible online sales tax remain speculative, Sunak has floated the idea of a  2% levy on all goods sold by online retailers. Proponents say the levy will help struggling high street stores compete with online behemoths like Amazon

Background to the digital services tax debate

An online sales levy is not the only digital tax proposal. As an alternative (or in addition), many analysts have called for digital services tax for global tech firms.

In contrast to digital services VAT, which is a sales tax, many countries have also proposed digital services tax as a corporate tax levied on profits. The tax would likely principally (or exclusively) affect very large tech companies that operate globally. 

As early as 2018, then Chancellor Philip Hammond proposed a digital services tax in the UK. At the time, Hammond said that the UK could not afford to wait for global consensus on taxing tech giants. 

More recently, the head of the OECD expressed confidence that participating countries can reach consensus on a global framework for digital taxes. 

Cross-border digital VAT

Much uncertainty remains on precisely how to tax e-commerce sales and digital services. However, regulators are clearly working hard to update policies to meet the new demands of the digital economy.

To that end, an increasing number of countries are imposing VAT on nonresident digital services providers

Digital services VAT on foreign companies helps to ensure that locally VAT-registered digital companies are not at a competitive disadvantage in relation to foreign competitors. 

A more effective way to manage VAT on online sales

The framework governing the internet economy is rapidly evolving. Businesses that sell goods or services online need flexible, effective VAT compliance solutions that keep you ahead of changing regulations. 

Vatglobal’s technology-driven VAT compliance solution makes navigating the digital economy faster, simpler and more efficient. Get in touch with Vatglobal for an integrated VAT compliance solution for your business. 

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