It’s no surprise that the government needs money. The damage the Covid-19 pandemic has had on the global economy makes me sick. It’s been said that the government needs to raise around £30 billion in order to stabilise the national debt as a share of GDP. Furthermore, the Tories have put into place a ‘triple tax lock’, meaning that they’ve agreed to not increase the VAT rate. £30 billion is a lot of money, and I can guarantee you that the government will be scrabbling around to find the extra cash they so desperately need.
I would have laughed you out the room a year ago if you’d told me I’d be in favor of more business tax, however the advancement of technology in the business world has led to businesses emerging that are based only online. Amazon is an example of one of the original online companies. Due to Amazon not following the traditional brick and mortar business model, it has been able to avoid paying some business taxes. Many firms have since followed in Amazon’s footsteps once the huge disparity between Amazon’s profits and the amount of tax that they were paying was uncovered. This has led to the emergence of the sharing economy.
The treasury has finally said that are aware that the sharing economy challenges the current VAT tax base and that this needs to be reviewed. VAT currently raises around £160 billion a year and we’re gonna need a lot more than that to help get us out of the debt we’ve accumulated in 2020. I think that the government is completely right to raise the extra cash they need by starting to tax the sharing economy.
Common sharing economy sectors include short-term accommodation, passenger transport, household services, collaborative finances, and on-demand professional services. Companies such as Uber, Airbnb and Task Rabbit all operate in the sharing economy for example. These companies, along with others, have managed to dodge paying roughly £20 billion in taxes. This is due to the individual provider of the service earning below the £85k tax threshold.
As well as helping to raise the money we need to get us out of debt, taxing the sharing economy will also help to act as a deterrent. Businesses from other sectors that want to try and use technology to gain an unfair advantage will be discouraged from doing so. The treasury has said they want to level [the] playing field for all businesses. Once the sharing economy starts contributing fairly to the economy, the business playing field will then start to level.
At the moment, traditional businesses are having to compete with huge internet companies and if the government doesn’t step in and protect these long-established businesses then our beloved traditional high street with quaint, unique businesses will just disappear. I fully believe in using technology to enhance a business; however the tax system works against traditional business and in favour of internet companies. These new companies have used technology to develop their businesses and by doing so they’ve managed to avoid paying VAT.
The fact the treasury has finally caught on that they are missing out on a large chunk of money fills me with joy. I am fully in support of tax being used to balance the playing field. I liked how back in April the treasury introduced a 2% digital sales tax and I hope something along those lines happens with VAT. I think it’s time companies in the sharing economy start to make a fair contribution to society and start paying business tax like the rest of us.