DEBATE: Is Rishi Sunak’s digital tax a good idea to save the high street?

Is Rishi Sunak’s digital tax a good idea to save the high street?

Jordan Shlosberg, co-founder of proSapient, says YES.

High street retail is not fundamentally unprofitable, but is disadvantaged compared to online retail through higher taxes and overpriced leases. 

Through shifting the national tax burden from physical to online retail, the government can support a sector that provides not only jobs but also a soul for local neighbourhoods.

The consumer move to online sales has also meant a shift of British tax receipts into low-tax jurisdictions. As well as providing a respite to a sector which supports many livelihoods, the proposed tax adjustment will also keep tax receipts within the country.

Levelling the tax playing field will have another positive impact too. There is currently a record $2.5 trillion of dry powder held by private equity investors, but they will not invest in industries facing consistent structural headwinds. The alleviation of business rates following the implementation of a digital tax is the first step towards the retail sector becoming attractive for those funds.

Will Lovatt, general manager (Europe) at PROS, says NO.

Were all online transactions to be subject to the chancellor’s online sales tax plan, this would severely hamper businesses’ ability to recover from the financial impact of Covid-19. 

Research we conducted into business buying behaviours since the pandemic began shows that 37 per cent of people are now primarily purchasing through digital channels — an eight point rise from pre-outbreak. 

The consumer trend for prioritising digital channels has accelerated as physical channels are just not an option. And it comes with its own business benefits for consumers and business alike. Personalised offerings, consistent pricing and self-service is keeping customers on the digital path, while every online interaction yields data about that customer to further personalise a next offer, deepening that buyer-seller relationship.

This behaviour isn’t going to change just because of a new tax. Businesses must meet customers where and when they want to be sold to — and increasingly customers want that interaction to be online. 

To penalise online transactions in the current climate would adversely affect buyer choice while curtailing revenue recovery efforts in all industries.

Main image credit: Getty