Apple's online store could be more expensive for UK customers in the future

Posted:
in General Discussion edited July 2020
The UK government is reviving discussions about applying a 2% online sales tax, with the intention of making brick-and-mortar stores more competitive versus online offerings.

Apple Store on Regent Street, London
Apple Store on Regent Street, London


Online retailers have been blamed in the past for drawing consumers away from retail outlets in the UK, with COVID-19 making trading conditions worse for physical stores in early 2020. While there is a variety of factors at play, the UK government is looking into plans to level the playing field, by making it more expensive to buy online.

Chancellor Rishi Sunak is examining whether an online sales tax of around 2% on goods sold online would help create a "sustainable and meaningful revenue source for government" by balancing out costs. The Times reports the Treasury was concerned about how high street retailers had the burden of business rates for "high-value" properties that online variants didn't have to pay.

Aside from a possible 2% tax on goods sold, there is also the prospect of an additional tax on consumer deliveries, under the claims it would help curb pollution.

The Treasury is also concerned by COVID-19, advising it needs the government to act to ensure "the tax system raises sufficient revenue."

For Apple, such a sales tax would be puzzling to implement, as it has both physical and online retail in the UK, and has identical pricing across the board. Applying a sales tax to online sales would certainly make its digital operations more expensive to operate, but without changing its online prices to reflect that, there would be no incentive for customers to head to retailers.

If Apple decides to pass the cost of the tax on to consumers, this would mean that online iPhone sales directly from Apple would be more expensive than in stores, once the tax is applied. Even so, consumers would have to weigh up whether the cost saving is worth it compared to the effort of visiting a store, the cost of transportation, and the time required to make the trip.

There has already been some pushback on the proposals from the British Retail Consortium, which represents major online and physical retailers in the UK. "Taxing the sale or delivery of online goods would simply be another burden on an already overtaxed industry, one that would ultimately hit consumer spending through higher prices," said BRC director of business and regulation Tom Ironside to The Guardian.

This would not be the only tax Apple's online sales are affected by in the UK, as a 2% digital services tax commenced in April against UK-derived revenues of major technology companies. While the proposed online retail tax is anticipated to raise in the region of 2 billion GBP ($2.57 billion) annually, the digital services tax revenue is valued at only 300 million GBP ($386 million) for 2020.

Comments

  • Reply 1 of 13
    darkpawdarkpaw Posts: 212member
    "Aside from a possible 2% tax on goods sold, there is also the prospect of an additional tax on consumer deliveries, under the claims it would help curb pollution."

    More taxes from Chancellor Rishi Sunak... This doesn't affect (hurt) the online retailers at all. Both of these would just increase prices for the consumer who isn't going to change their habits.

    No one in the Conservative Party seems to understand that there are solutions to this aside from adding new taxes or increasing existing taxes. You cannot simply point at something and say, "TAX THAT!".

    Take this, for example:
    "The Times reports the Treasury was concerned about how high street retailers had the burden of business rates for "high-value" properties that online variants didn't have to pay."

    And who puts that burden on high street retailers? The government. They have the ability to wipe out business rates for high street retailers, but they won't. To level the playing field, you either wipe out business rates (not gonna happen because of the tax revenue), or you charge online-only retailers the same business rates (an increase in tax revenue).

    If Amazon say they "pay all taxes they are legally obliged to pay in the UK", then increase those taxes. Tax the profits they make in this country, but don't raise the price of everything for the consumer.

    (I am not a tax lawyer, and happily acknowledge I could be talking BS.)
  • Reply 2 of 13
    By all means tax deliveries... if they are made using Petrol/Diesel engined vehicles. That would spur the companies making the last mile deliveries to move to Electric Vehicles. Then the government can put another nail in the coffin of 'Big Oil' and Fossil Fuels. At the time I'm writing this post, almost 50% of the UK Power requirements is coming from Renewable sources (Solar, Wind, Hydro)
    elijahgcommand_fdarkvader
  • Reply 3 of 13
    DAalsethDAalseth Posts: 2,783member
    The tax advantage of online over brick and mortar stores is part of the reason so many little stores have closed. This has been very damaging to the economy. Amazon is the worst but all of them share the blame. So by all means hit online retailers with a tax, the jobs you save may be your own.
    elijahgcommand_f
  • Reply 4 of 13
    elijahgelijahg Posts: 2,753member
    darkpaw said:
    "Aside from a possible 2% tax on goods sold, there is also the prospect of an additional tax on consumer deliveries, under the claims it would help curb pollution."

    More taxes from Chancellor Rishi Sunak... This doesn't affect (hurt) the online retailers at all. Both of these would just increase prices for the consumer who isn't going to change their habits.

    No one in the Conservative Party seems to understand that there are solutions to this aside from adding new taxes or increasing existing taxes. You cannot simply point at something and say, "TAX THAT!".

    Take this, for example:
    "The Times reports the Treasury was concerned about how high street retailers had the burden of business rates for "high-value" properties that online variants didn't have to pay."

    And who puts that burden on high street retailers? The government. They have the ability to wipe out business rates for high street retailers, but they won't. To level the playing field, you either wipe out business rates (not gonna happen because of the tax revenue), or you charge online-only retailers the same business rates (an increase in tax revenue).

    If Amazon say they "pay all taxes they are legally obliged to pay in the UK", then increase those taxes. Tax the profits they make in this country, but don't raise the price of everything for the consumer.

    (I am not a tax lawyer, and happily acknowledge I could be talking BS.)
    Actually, Rishi has announced a review of business rates. Possibly putting the onus on the landowner instead, which would likely help. As much as we all hate them we do need taxes, the burden on high street retailers should be the same as the burden on Amazon etc - if Amazon etc shared the burden, the high street retailers would have less on their shoulders.

    As you say, to avoid tax being paid by consumers you tax profit instead, but of course multinational companies offset everything they sell with a web of subsidiaries who charge each other, so declared "profit" is near enough zero. The EU made a(nother) big mistake years ago allowing companies to centralise their EU operations and funnel profits to that operation, anyone with the slightest foresight could have worked out that would mean billions for the tax haven of Europe (Luxembourg and Ireland) but nothing for everyone else. And then they tried to backdate the fix by 10 years, and lost in court.  

    This all proves that why international tax law needs fixing and profits need to be declared properly in the country of sale. Apple knows exactly how much they're making from each sale in the UK, but legally hides that from HMRC. Apple has billions in offshore profits that they want to repatriate to the US but won't because they have to then pay tax on it, and they don't want to - despite paying essentially zero tax on it in the country the actual sale took place. It's completely unfair that massive multinationals can use tax havens that are entirely unavailable to smaller national companies.
    edited July 2020 command_f
  • Reply 5 of 13
    crowleycrowley Posts: 10,453member
    darkpaw said:
    "Aside from a possible 2% tax on goods sold, there is also the prospect of an additional tax on consumer deliveries, under the claims it would help curb pollution."

    More taxes from Chancellor Rishi Sunak... This doesn't affect (hurt) the online retailers at all. Both of these would just increase prices for the consumer who isn't going to change their habits.

    No one in the Conservative Party seems to understand that there are solutions to this aside from adding new taxes or increasing existing taxes. You cannot simply point at something and say, "TAX THAT!".

    Take this, for example:
    "The Times reports the Treasury was concerned about how high street retailers had the burden of business rates for "high-value" properties that online variants didn't have to pay."

    And who puts that burden on high street retailers? The government. They have the ability to wipe out business rates for high street retailers, but they won't. To level the playing field, you either wipe out business rates (not gonna happen because of the tax revenue), or you charge online-only retailers the same business rates (an increase in tax revenue).

    If Amazon say they "pay all taxes they are legally obliged to pay in the UK", then increase those taxes. Tax the profits they make in this country, but don't raise the price of everything for the consumer.

    (I am not a tax lawyer, and happily acknowledge I could be talking BS.)
    Business rates are one of only a few ways for local government to collect any revenue, as they have been starved of income by the current Conservative national government.  Getting rid of business rates would cripple communities and local services, or would mean that council tax would have to rise, and any rise would hit poorer communities the hardest.

    I think you're right that business rates for out of town warehouses for digital order distributers could be increased to level the playing field.  But many of them will operate out of tax exempt business parks that the government is very encouraging of (see also their proposals for free ports).

    In short, the Conservative government is mismanaging the economy to an atrocious extent for their rich friends, and when they eventually get kicked out (however long that may take) they're going to leave the Treasury and the national fortune in a god awful mess.
  • Reply 6 of 13
    elijahgelijahg Posts: 2,753member
    For Apple, such a sales tax would be puzzling to implement, as it has both physical and online retail in the UK, and has identical pricing across the board. Applying a sales tax to online sales would certainly make its digital operations more expensive to operate, but without changing its online prices to reflect that, there would be no incentive for customers to head to retailers. 

    If Apple decides to pass the cost of the tax on to consumers, this would mean that online iPhone sales directly from Apple would be more expensive than in stores, once the tax is applied. Even so, consumers would have to weigh up whether the cost saving is worth it compared to the effort of visiting a store, the cost of transportation, and the time required to make the trip. 
    No more puzzling than every other high street retailer also has an online presence: Currys, Morrisons, Tesco, Debenhams, Sainsbury's, Next, Screwfix etc, etc. The prices will only differ for Apple or any of the dual-presence companies if they decide to charge consumers the 2% rather than sucking it up, which is obviously the idea. And if some companies suck it up and others don't, people will look upon those that don't with disdain.
    command_f
  • Reply 7 of 13
    beeble42beeble42 Posts: 32member
    Online has been successful because I can see and choose from a wider variety of products than can be physically located in a store, no matter how large that store is. I can search for the type of product I want and see dozens of matches instantly. No wandering up and down aisles hoping they have one of the kind of thing I'm looking for and having to settle for that. Retail stagnated in the 19th Century and paid the price. The kinds of retail stores that are surviving are doing things that can't be done online.

    Adding taxes will always hit the consumer. Not just taxes at point of sale. All taxes are costs of doing business and all prices consumers pay reflect that. In reality, no business ever pays any tax. It's always their customers who pay because every cent/penny/razoo of tax is included in the price of the goods and services the business sells whether it's itemised on a receipt or not.

    This will just increase prices and won't do anything to save brick and mortar retail because most retail stores still don't have an answer to the convenience of online shopping. Most are in retail sectors that never will have an answer.

    Same for taxing deliveries. It just increases prices that the consumers pay with zero impact on the businesses. None at all. Delivery costs have fallen over time due to volume, but online retail grew explosively when shipping costs were roughly double what they are now if you account for inflation.

    Let's add taxes to online banking transactions to drive people back to branches. They are on high street too. Those teller jobs are just as important. People don't value their time and won't mind standing in line for 30+ minutes to talk to someone to do something they could do themselves on their phone in 20 seconds. Just as stupid an idea.

    It's not about price. Never has been. Never will be.

    One day governments will realise that when it comes to tinkering with market economies, they're playing 8 dimensional chess. Since they can only seem to think in 2 dimensions (and only know how to play checkers anyway) they are never going to achieve what they claim they want to achieve, just like all the other times they've tried. Every other dimension in the market place will shift around their change and a new equilibrium will form and because they only thought about one thing, it won't be what they anticipated. Then they'll have a new problem to deal with, but they'll be too stupid to realise that it's a problem of their own making, so they'll tinker with the system again. New unexpected equilibrium. Wash. Rinse. Repeat.
  • Reply 8 of 13
    elijahgelijahg Posts: 2,753member
    crowley said:
    darkpaw said:
    "Aside from a possible 2% tax on goods sold, there is also the prospect of an additional tax on consumer deliveries, under the claims it would help curb pollution."

    More taxes from Chancellor Rishi Sunak... This doesn't affect (hurt) the online retailers at all. Both of these would just increase prices for the consumer who isn't going to change their habits.

    No one in the Conservative Party seems to understand that there are solutions to this aside from adding new taxes or increasing existing taxes. You cannot simply point at something and say, "TAX THAT!".

    Take this, for example:
    "The Times reports the Treasury was concerned about how high street retailers had the burden of business rates for "high-value" properties that online variants didn't have to pay."

    And who puts that burden on high street retailers? The government. They have the ability to wipe out business rates for high street retailers, but they won't. To level the playing field, you either wipe out business rates (not gonna happen because of the tax revenue), or you charge online-only retailers the same business rates (an increase in tax revenue).

    If Amazon say they "pay all taxes they are legally obliged to pay in the UK", then increase those taxes. Tax the profits they make in this country, but don't raise the price of everything for the consumer.

    (I am not a tax lawyer, and happily acknowledge I could be talking BS.)
    Business rates are one of only a few ways for local government to collect any revenue, as they have been starved of income by the current Conservative national government.  Getting rid of business rates would cripple communities and local services, or would mean that council tax would have to rise, and any rise would hit poorer communities the hardest.

    I think you're right that business rates for out of town warehouses for digital order distributers could be increased to level the playing field.  But many of them will operate out of tax exempt business parks that the government is very encouraging of (see also their proposals for free ports).

    In short, the Conservative government is mismanaging the economy to an atrocious extent for their rich friends, and when they eventually get kicked out (however long that may take) they're going to leave the Treasury and the national fortune in a god awful mess.
    Or local councils could spend money more efficiently, which the reduction in contributions by the national government has encouraged hugely. I have a friend who works in a local council, and when the first round of austerity begun, literally half the people in her office of 50 was made redundant. The workload for existing people didn't increase, the times for the cases they were working on didn't increase, but the council saved £600m overnight. 

    So no, mismanaging would be encouraging waste, which the Tories are clearly not. If the mismanagement was so bad then why before the virus was the unemployment level at the lowest ever? Is that a worse mess than Alistair "I'm afraid there's no money" Darling, or Communist Corbyn and McDonnell's little red Mao book?
    edited July 2020 aderutter
  • Reply 9 of 13
    command_fcommand_f Posts: 418member
    Since no-one has seriously suggested that we should sweep away bricks and mortar shops, levelling the tax burden with online is essential. As physical retail has shrunk and online grown, this points to raising tax on online business (the alternative of allowing tax revenues, and hence government spending, to reduce isn't credible in these days of COVID and Brexit). In the longer term, perhaps all shopping becomes virtual and makes the need to replace lost tax revenues even greater.

    I see no paradox for the likes of Apple. They are first-party witness to the disparity in costs between physical and online and currently, I presume, make greater margins from online than physical. They can watch for a boost in physical sales to cover the increased online costs or just increase prices across the board (by less than 2%!) if this doesn't happen and they don't choose to absorb the cost. Consumers, meanwhile, will see a reduction in the savings they've had from the early days of online shopping.
    elijahg
  • Reply 10 of 13
    SpamSandwichSpamSandwich Posts: 33,407member
    DAalseth said:
    The tax advantage of online over brick and mortar stores is part of the reason so many little stores have closed. This has been very damaging to the economy. Amazon is the worst but all of them share the blame. So by all means hit online retailers with a tax, the jobs you save may be your own.
    Why not make the tax advantages of online merchants the same for their real-world counterparts instead? I’m not a fan of the idea that the citizenry “owes” the government.
    razorpit
  • Reply 11 of 13
    laytechlaytech Posts: 334member
    The solution is actually to lower corporate tax to a level that encourages business to pay the taxes and then enforce every cent / pence is paid by those institutions. Lower taxes overall is a good thing but it needs to be fair and reasonable for everyone. Adding taxes only increases it to the consumer, on top of 20% VAT (GST) they are already paying in the UK. It's madness and how the hell does that work when you have a brick and mortar shop and an online shop which in fairness most businesses do these days. Keep taxes simple, fair and reasonable. You can't tax yourself out of debt as it will stifle growth.
    command_f
  • Reply 12 of 13
    command_fcommand_f Posts: 418member
    DAalseth said:
    The tax advantage of online over brick and mortar stores is part of the reason so many little stores have closed. This has been very damaging to the economy. Amazon is the worst but all of them share the blame. So by all means hit online retailers with a tax, the jobs you save may be your own.
    Why not make the tax advantages of online merchants the same for their real-world counterparts instead? I’m not a fan of the idea that the citizenry “owes” the government.
    I agree that citizens do not "owe" the government. However, the government has no money of its own yet "owes" the citizens a whole bunch of things it has to fund. The money raised from taxation has to cover, in some sense, the cost of infrastructure and services (there's no other money). In the UK, this covers everything from roads to hospitals, police to teachers, benefits payments to COVID relief measures: a huge amount of 'stuff'

    So cutting taxes on bricks and mortar merchants will reduce the tax raised and hence reduce the 'stuff' that can be provided. Government is responsible for the really difficult decisions and trade-offs around how much to spend and thus how much to tax.
  • Reply 13 of 13
    crowleycrowley Posts: 10,453member
    elijahg said:
    crowley said:
    darkpaw said:
    "Aside from a possible 2% tax on goods sold, there is also the prospect of an additional tax on consumer deliveries, under the claims it would help curb pollution."

    More taxes from Chancellor Rishi Sunak... This doesn't affect (hurt) the online retailers at all. Both of these would just increase prices for the consumer who isn't going to change their habits.

    No one in the Conservative Party seems to understand that there are solutions to this aside from adding new taxes or increasing existing taxes. You cannot simply point at something and say, "TAX THAT!".

    Take this, for example:
    "The Times reports the Treasury was concerned about how high street retailers had the burden of business rates for "high-value" properties that online variants didn't have to pay."

    And who puts that burden on high street retailers? The government. They have the ability to wipe out business rates for high street retailers, but they won't. To level the playing field, you either wipe out business rates (not gonna happen because of the tax revenue), or you charge online-only retailers the same business rates (an increase in tax revenue).

    If Amazon say they "pay all taxes they are legally obliged to pay in the UK", then increase those taxes. Tax the profits they make in this country, but don't raise the price of everything for the consumer.

    (I am not a tax lawyer, and happily acknowledge I could be talking BS.)
    Business rates are one of only a few ways for local government to collect any revenue, as they have been starved of income by the current Conservative national government.  Getting rid of business rates would cripple communities and local services, or would mean that council tax would have to rise, and any rise would hit poorer communities the hardest.

    I think you're right that business rates for out of town warehouses for digital order distributers could be increased to level the playing field.  But many of them will operate out of tax exempt business parks that the government is very encouraging of (see also their proposals for free ports).

    In short, the Conservative government is mismanaging the economy to an atrocious extent for their rich friends, and when they eventually get kicked out (however long that may take) they're going to leave the Treasury and the national fortune in a god awful mess.
    Or local councils could spend money more efficiently, which the reduction in contributions by the national government has encouraged hugely. I have a friend who works in a local council, and when the first round of austerity begun, literally half the people in her office of 50 was made redundant. The workload for existing people didn't increase, the times for the cases they were working on didn't increase, but the council saved £600m overnight. 

    So no, mismanaging would be encouraging waste, which the Tories are clearly not. If the mismanagement was so bad then why before the virus was the unemployment level at the lowest ever? Is that a worse mess than Alistair "I'm afraid there's no money" Darling, or Communist Corbyn and McDonnell's little red Mao book?
    What has unemployment got to do with the crisis in funding of social care, homelessness, and core services at the local level?  The problem with unqualified cuts to "eliminate waste" is that there often isn't nearly as much waste as conservatives think there is, and once the waste is gone you're eliminating the comfort gap. And once the comfort gap is gone you're eliminating capacity.  And once the capacity is gone you're eliminating the contingency.  And once the contingency is gone you've destroyed something that took years to build, and you won't be able to restore it, you'll need to build it again from scratch.  That's not far off where we're at with social care.

    I'm not interested in comparing with Labour.  Labour aren't in government and their inability to pull themselves together in no way makes the government better.
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