A tax crackdown on online marketplaces such as Amazon and eBay that could raise up to £1bn more for the Treasury is reportedly being drawn up for John Healey’s first budget.
The chancellor is said to be preparing to announce that online marketplaces will be made responsible for collecting tax owed by retailers selling on their platforms.
The move would target foreign retailers that have taken advantage of a lack of robust rules and enforcement to avoid paying VAT on their sales, according to the Times. It said Healey was expected to announce that these changes would be used to fund cuts to business rates for high street shops.
Online marketplaces would be made responsible for collecting VAT at source for all retailers on their platform who have an annual turnover of more than £90,000, it was reported.
The development comes as pressure continues to grow on Andy Burnham and Healey to provide relief to struggling small businesses on the high street before the budget on 28 October.
Before he was elected in Makerfield, Burnham said he would increase the threshold for business rates so that 140,000 small high street retailers would not pay the tax.
While the government faces calls from many factions to cut tax, this week the Institute for Fiscal Studies warned Healey that his budget risks being a “work of fiction” unless he sets out plans to cover £35bn in spending pressures.
The IFS said the damage from higher inflation meant the chancellor would need to either top up funds for his current government spending plans or impose deep real-terms cuts by the end of the decade.
In a boost for the Treasury, this week the International Monetary Fund upgraded its GDP growth forecast for the UK this year to 1.3%, up 0.3 percentage points from its previous update in July.
However the IMF also cautioned that Healey should “stay the course” and continue repairing the UK’s public finances. Silvana Tenreyro, the IMF’s economic counsellor, said the UK “stands out” among G7 countries in having a plan to narrow its deficit.
A spokesperson for the Treasury said: “As has always been the case, decisions on tax are a matter for the chancellor to set out at fiscal events rather than routinely commenting on rumour, speculation or proposals.”
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