John Healey is preparing to launch a £1bn tax crackdown on major online marketplaces, with revenues earmarked to fund relief for struggling high street retailers.
The Chancellor is expected to announce at the Budget later this month that platforms including Amazon (AMZN), eBay, and Temu must collect tax owed by sellers operating on their sites.
Under the plan, online marketplaces would become responsible for collecting VAT at source for each seller whose annual revenue exceeds £90,000.
The policy is designed to tackle longstanding concerns that foreign retailers are establishing UK shell companies specifically to avoid paying VAT on sales to British consumers.
Revenues raised from the crackdown are expected to be directed toward business rates cuts for high street retailers, a move long championed by Andy Burnham.
The trade-off is likely to be welcomed by retail industry leaders, who have been mounting pressure on the government over soaring tax bills, citing business rates and employment costs as their heaviest burdens.
However, some tax experts argue the proposed threshold does not go far enough to close the loophole entirely.
Dan Neidle, the founder of Tax Policy Associates, told the Times: “This is a step in the right direction but the Treasury needs to go further and make online marketplaces responsible for collecting every penny of VAT on the sales made on their platform.”
Neidle added: “Unless that happens these Chinese sham companies will find just another way around the rules.”
Separately, Healey appears to have stepped back from a previously floated plan to hike taxes on out-of-town warehouses, a proposal that had drawn fierce opposition from the retail sector.
John Lewis executive chairman Jason Tarry said last week that a warehouse tax would “reveal a fundamental misunderstanding of how modern high streets work.”
Retail bosses had warned that any warehouse levy would inevitably push up operating costs, with those increases ultimately passed on to consumers through higher prices.
The decision to pursue online sellers instead is expected to play well with high street retailers, who have long argued they face a disproportionately heavy tax burden compared to their e-commerce rivals.
Amazon itself has voiced support for the crackdown, estimating the measure would raise approximately £700m for the Treasury, a figure below the government’s own projections.
An Amazon spokesman said: “Closing this loophole will raise significant revenue for the exchequer and simplify compliance for both HMRC and legitimate sellers.”
A Treasury spokesperson said: “As has always been the case, decisions on tax are a matter for the chancellor to set out at fiscal events.”