The government is currently consulting on proposals for a 1-2% online sales tax for businesses with online sales over £2m with the estimated £1bn in annual revenue raised used to make improvements to the business rates and support high street retail.

Business rates are a huge source of revenue for the government, bringing in a total of £31.7bn in 2019-20, representing 1.4% of GDP.

A new paper from the Centre for Policy Studies, supported by the Coalition for a Digital Economy (Coadec), shows that this would do more harm than good to consumers, businesses and the economy as the government’s own consultation paper to a large extent acknowledges.

The report states that ‘any plausible model for an online sales tax would be very complicated, costly to administer, and highly distortionary – while doing absolutely nothing positive for economic growth’.

Pol