I won't shed a tear for Digital Service Tax, the tax that harms UK retail.

Digital Services Tax (DST) may be in the firing line in the Trump US Trade negotiations but it's loss won't be a loss to UK retail. Taxes raise revenue for the State but all too often claims are made about their benefits that simply don't hold up to scrutiny. DST has been trumpeted as a benefit to both the exchequer and the high street. But is it? As a source of revenue it does the job, taxing tech giants who are dominating the internet, but has it helped the high street or UK retail in general ?

DST applies to Online Market Places (OMPs) because they are deemed to provide a digital service to third party users. Taxing those OMPs on the face of it makes sense, because traditional retail has suffered due to the cost and tax advantages purely internet based retailers enjoy. However the real issue is the fact the internet has become dominated by a small number of large OMPs and many traditional retailers, including those on the high street, have had to adapt and sell on these OMPs, simply because they are so dominant and thus popular with consumers.

When DST was introduced in April of 2020 OMPs passed the cost of DST to their users by increasing fees. Even worse where OMPs sell goods on their own market place (such as Amazon) DST is not payable because the transactions are not deemed to made through a digital service but rather via the sellers own website. The net result is an unlevel playing field between businesses selling on their own website vs those selling on an OMP.

Parliament recognised that DST did not level the playing field. The Public Accounts Committee in their 5th of April 2023 report noted "the Digital Services Tax is an interim solution to meet a perceived a lack of ‘fairness’ in the current system, and is not on its own intended to deliver a ‘fair’ system, or to level the playing field between online retailers and the high street"

The Liberal Democrats have proposed an increase in DST to 6%. This would further increase the market distortion caused by DST and further harm traditional and high street retailers who find themselves reliant on major OMPs simply because they have become so dominant.

DST in terms of online retail was always a bad idea. Either it should be reformed so that it doesn't distort competition or it should be scraped entirely.