Economic Impact | 10 Nov 2021

The Economic Impact of an Online Retail Sales Tax in the UK

Amazon have commissioned Oxford Economics to produce an independent quantitative assessment of the economic implications of the introduction of an online sales tax in the UK.

On 27 July 2020, HM Treasury (HMT) announced a call for evidence around the issue of a business rates review. Contained within this document was a consideration of alternative tax bases that could raise revenue for the Exchequer to compensate for any shortfall that might be created by business rates reform. One of the options proposed was an online sales tax (OST).

In this context, Amazon have commissioned Oxford Economics to produce an independent quantitative assessment of the economic implications of the introduction of such a tax in the UK.

We find that that the introduction of an OST would raise around £1.6 billion in government revenue. The burden of the tax would be split between consumers, online sales platforms, and upstream businesses.

Our analysis shows that a majority of the tax’s burden will most likely be borne by consumers who could lose around £1.3 billion in welfare terms. The net inefficiencies due to the OST are estimated to be around £200 million (i.e., 13% of the revenue).

The government’s fiscal options will need to be assessed against a range of economic as well as procedural criteria. In our assessment of the OST against the Treasury Select Committee’s principles of taxation, we found that the OST is distortive and also could potentially restrict SMEs from competing in the retail market. Further, the disproportionate impact on households in the lowest income decile and on economically weaker regions of the UK as well as the restrictive effect on the elderly and the disabled raise questions about the fairness of the OST.

Read the report

Oxford Economics’ team is expert at applying advanced economic tools that provide valuable insights into today’s most pressing business, financial, and policy issues.

To find out more about our capabilities, contact:

Sam Moore
+44 (0)207 803 1415

Hamilton Galloway
+1 (646) 503 3068

Rhianne Clark
+65 6850 0112

Related Services


Investment behaviour in sustainable finance

To meet the 2050 climate targets, the global sustainability and climate goals will require massive public and private investments of more than 131 trillion euros.

Find Out More


Investitionsverhalten bei nachhaltigen Finanzinstrumenten

Investitionsverhalten bei nachhaltigen Finanzinstrumenten: Eine verhaltensökonomisch experimentelle Analyse von "ESG-Präferenzen" und deren Implikationen für Finanzinstitutionen und Politik.

Find Out More


Tobacco Track & Trace Systems Across Africa

The purpose of this study is to review progress towards implementing track & trace (T&T) systems across the continent, to assess the compliance of existing systems with ITP requirements and to investigate the potential benefits from a regional perspective to combating illicit trade.

Find Out More