Latest Government guidance indicates that the new Digital Services Tax announced during last week's Budget will not level the playing field between bricks and mortar and online retailers. This is contrary to what many in the retail and property industries had been calling for, or hoped.
The new levy will impose a tax on the "platform fee" paid by sellers using online marketing platforms such as search engines, social media sites and online market places. It does not apply to the sale of goods online. Whilst that is good for multi channel retailers it does not address the concerns of property investors and bricks and mortar retailers of creating a more level playing field for business - and their argument that online retailers use and should therefore pay for public services and infrastructure to supply and deliver their goods to customers, in much the same way as traditional retailers.
Property industry and retailers should remain vigilant whilst the new tax regime is developed. There is still a risk that the final levy could apply to multi channel retailers who fulfil sales online as well as from their stores or retailers who sell online via a concession or emporium basis. That could leave bricks and mortar retail with an even greater tax burden than it faces presently.
Social media firms and search engines will pay the 2% tax on the advertising revenue earned from UK users in this way. When it comes to online marketplaces, the aim is not to put a tax on the payment from the consumer but on the "platform fee", the commission paid by the merchants using the market. Firms will only pay the tax if they have global revenues of at least £500m. They have to be profitable, and the first £25m of UK revenues will be tax free. The Office for Budget Responsibility says around 30 companies could end up being affected. So let's look at who might fit into each category: