Labour calls for tax cuts for hardest-hit sectors ahead of the budget

Suban Abdulla
·3-min read
SOUTHEND, ENGLAND - OCTOBER 05: Shadow Chancellor Anneliese Dodds responds to Chancellor Rishi Sunak’s Conservative conference speech during a visit to Essex Injection Mouldings LTD an injection moulding plant on October 5, 2020 in Southend-on-Sea England. The Shadow Chancellor made the visit to find out about the impact of Covid uncertainty on the business and the Government’s failure to replace furlough with a job support scheme which incentivises keeping on staff in key sectors of the economy. She also responded to Chancellor Rishi Sunak’s Conservative conference speech.  (Photo by John Keeble/Getty Images)
Shadow Chancellor Anneliese Dodds. Photo: John Keeble/Getty Images

Britains opposition party has urged the government to extend tax cuts for some of the worst hit UK industries by the coronavirus pandemic.

Shadow chancellor Anneliese Dodds called on chancellor Rishi Sunak to extend the current VAT cut from 20% to 5%.

The Labour Party made the calls for the retail and hospitality sectors for another six months from March or or until three months after the lifting of COVID-19 restrictions, or whichever comes later.

Additionally, she also called for the extension of business rates holiday past the end of the current financial year. Saying: “Britain can’t afford the chancellor to make the same irresponsible mistake all over again. He must announce these continued tax cuts now, not wait another month and risk even more job losses.”

She said that UK businesses “cannot wait” another month — until the Budget on 3 March — to see if these tax cuts will be extended. Dodds said the uncertainty is damaging business confidence.

“The chancellor has acted at the last minute time and again during this crisis — and that dither and delay has created uncertainty for businesses, cost jobs and threatened our recovery,” she said.

The shadow chancellor also urged the government to follow “the example of Labour-run Wales and capping relief so that support is targeted to those that need it most.”

On Friday evening, the chancellor announced that the Treasury will “ease the burden” for millions of firms by extending the period during which businesses can make no repayment.

READ MORE: Online retail giants could face 'double tax' in UK on pandemic profits

It comes as reports today claimed that Sunak was mulling hitting online retail giants who have profited off the pandemic, with a digital sales tax.

According to emails leaked to The Sunday Times, Amazon (AMZN) and tech firms are among companies summoned to a meeting this month, to discuss how an online sales tax might work.

The taxes would aim to plug the black hole in the UK’s finances caused by borrowing to support jobs and the economy amid widespread lockdowns.

The Times said the Downing Street policy unit is also looking to impose an “excess profits tax” on companies that saw a surge in profit as a result of the crisis.

Retail sales made online jumped over the course of the last year. According to the British Retail Consortium and KPMG, excluding food the proportion of purchases made online rose from 31% to 46%.

Some of the firms in danger of being hit with the COVID-19 windfall tax include big supermarkets, food delivery companies Deliveroo and Just Eat (JET.L), online grocer Ocado (OCDO.L) and clothes retailer Asos (ASC.L).

A Treasury spokesman said on the matter: “We want to see thriving high streets, which is why we’ve spent tens of billions of pounds supporting shops throughout the pandemic and are supporting town centres through the changes online shopping brings.

“Our business rates review call for evidence included questions on whether we should shift the balance between online and physical shops by introducing an online sales tax. We’re considering responses now.”

WATCH: What UK government COVID-19 support is available?