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