The U.K. began a consultation into whether to introduce an online sales tax to help fund a reduction in levies on bricks-and-mortar retailers.
The government is inviting arguments for and against such a move, the Treasury said in a statement on Friday, adding that no decision has been made. A 1% revenue-based online sales tax could raise about 1 billion pounds ($1.3 billion) each year, according to the consultation document.
High street stores have long complained that they pay business rates based on property values of bricks-and-mortar outlets, a system that favors companies trading on the Internet and those with large out-of-town depots.
The government has said the proceeds of an online sales tax would go toward funding business rates relief.
Yet business rates in England generate more than 25 billion pounds in tax revenue each year, according to the Treasury, indicating that an online sales tax may only be of limited benefit to the physical retail sector.
“We want to see thriving high streets and a fair economy,” Lucy Frazer, financial secretary to the Treasury, said in the statement. “It’s right that, given the growing consumer trend to shop online, we work with stakeholders to assess the appropriate taxation of the retail sector.”
The consultation, which runs for three months, invites responses on questions such as which goods and transactions should be covered by such a tax, whether it should be a proportion of revenues or a flat fee, and whether it should apply also to intermediary vendors and business-to-business commerce.
The Institute of Economic Affairs think tank said in an emailed statement that an online sales tax would “penalize a new form of commerce which benefits the consumer.”