Enforce online shopping tax to support UK high streets, Healey told

Chancellor John Healey should impose a 2 per cent tax on internet purchases to support physical high street businesses across the UK, an influential think tank has urged.

The Institute for Public Policy Research (IPPR) also recommended a 1 per cent tax on click and collect services.

It comes as Mr Healey prepares to present the government’s upcoming financial statement on October 28.

Aditi Sriram, an economist at the IPPR, pressed the government to "shift some of the tax burden from bricks to clicks", arguing that online retailers do not face the same hurdles as traditional high street shops.

An estimated £1.5 billion could be raised by the measures, the think tank said, with funds allocated towards a reduction in business rates for leisure, hospitality and retail outlets.

The body, which has previously been linked to the Labour Party, said a business’s initial £500,000 in annual remote sales would be tax-exempt to safeguard smaller retailers.

Small businesses could be £1,400 better off annually and larger firms roughly £2,500, the IPPR calculated, with local authorities "fully compensated" for lost business rates revenue.

Mr Sriram, author of the IPPR report, said: “Britain’s tax system was built for an era when the location where you did business was closely linked to how much business you did. That is no longer the case.

“As people have moved their shopping online, high street shops and restaurants continue to face large, fixed tax bills simply because they need physical premises.

“The government should shift some of the tax burden from bricks to clicks and use the money to cut bills for the businesses that bring people onto our high streets.

“Online shopping is here to stay. The question is whether the tax system catches up with the economy we now have.”

The IPPR has also proposed a decrease in the retail, hospitality and leisure business rates multipliers in England, which are currently 38.2p for small properties and 43p for standard ones.

As a result of the proposed online sales tax, these would be reduced to 28.2p and 41p respectively, the IPPR said.

Andy Burnham unveiled a £210 million package aimed at regenerating communities last month.

The Prime Minister pledged to “restore pride and bring hope back” to high streets by revamping vacant shopping centres, disused cinemas and abandoned local eyesores across England.