UK plans online tax and 'excess profits' raid - report

Shares of AO World, Ocado and Asos and fell on Monday after the government was reported to be considering an online sales tax and a separate raid on "excessive profits" made during the Covid-19 crisis.

The Sunday Times said Treasury officials had called technology companies and retailers to a meeting before the budget in March to discuss how an online sales tax would work.

Internet shopping has exploded during the crisis as consumers have stayed at home and many shops have been forced to close for long periods. The UK's high streets were already in trouble before the pandemic forced the collapse of groups such as Debenhams and Philip Green's Arcadia.

Companies such as Amazon, Ocado and Boohoo have boomed during the crisis and officials are reported to see an online sales tax as a way to shift the balance towards struggling physical retailers. The British Retail Consortium has said such a move would also hit physical retailers with online operations but Tesco and other big retailers have supported the idea.

Online spending makes up about 30% of total retail sales in the UK, up from 20% a year ago, as record numbers of shops are forced to close, casting doubt on the future of Britain's high streets and town centres. The government is reviewing business rates, a long-running source of frustration for retailers, before the spring.

"Our business rates review call for evidence included questions on whether we should shift the balance between online and physical shops by introducing an online sales tax," the Treasury told the Guardian. "We’re considering responses now.”

Online electricals retailer AO World's shares fell 4% to 321.5p at 09:36 GMT and Asos dropped 3.4% to £47.33. Boohoo fell 4.9% to 347.2p and Ocado dipped 1.3% to £27.72.

Neil Wilson, chief market analyst at Markets.com, said: "This may raise a question about opportunistic tax policy (the government is meant to be pro-business). However, most people feel online retailers are not paying their fair share and the burden is falling too much on struggling high street stores. It’s never made sense that bricks-and-mortar businesses pay more in tax than the very rivals who are stripping away their market share."

Amazon paid £293m in tax to the UK Treasury last year on sales up 26% to £13.7bn, prompting renewed calls for the company to contribute more towards the company's infrastructure, health service and other government spending that supports its business.