George Bull

Written by: George Bull

George Bull

Senior Tax Partner

Autumn Budget: will Amazon tax pay for NHS elderly care?

We've previously discussed the news that Chancellor of the Exchequer Philip Hammond is considering an ‘Amazon tax’ intended to reduce the ability of the Internet retail giants to undercut retailers on UK high streets. This bid to level the playing field between traditional high-street retailers and the large Internet platforms will require very careful implementation: clicks-and-mortar high street businesses which also trade via Internet platforms could suffer a double whammy if they fall foul of the new Internet sales tax without any relief from business rates. We expect to hear more about this in the Chancellor's autumn Budget statement. 

Leading up to the Budget, the Chancellor is also under huge pressure to show how he will deliver the Prime Minister's commitment to £20bn of additional NHS funding. Some of this will inevitably come out of the general pot of taxation. Tax revenues are riding high and there is talk of an end to the age of austerity. However, the dawning of the age of Brexit-related fiscal uncertainty gives the Chancellor very little room to increase expenditure. While the policy mood of the government may be set against tax increases the hard fact remains that, in the absence of any further significant cuts which could be made, new money will have to be found to fund the NHS.

The Chancellor might be tempted to tick a couple of items off the government's to-do list and simultaneously boost his popularity by using tax hypothecation to provide urgently needed funding for social care for the elderly. This could provide a crucial boost to NHS finances. It has the potential to reduce bed-blocking and therefore shorten waiting lists by allowing more patients to have the treatment they require. But where would the tax come from? The ‘Amazon tax’ perhaps.

If a new, self-contained and eminently measurable Internet sales tax was hypothecated to fund social care for the elderly, the Chancellor might meet crucial health, business and social needs while boosting his popularity.

Redistribution is of course one of the two major underpinning principles of any tax system, so this ‘Robin Hood’ approach has much to commend it. However, care would have to be taken in the way the arrangement was implemented. By limiting tax hypothecation to only a part of the NHS budget, it would be easier to spot any problems as they emerge and to address them. 

Problems might include the amount of tax raised. If the ‘Amazon tax’ was to be hypothecated to fund elderly care, an amount would have to be guaranteed as a minimum with the government committed to providing top-ups if the tax fell below that level. Equally, if the ‘Amazon tax’ exceeded the amount required to fund elderly care, would the government be prepared to see the extra also going into the NHS, or would it wish to divert it back into the general tax pot? And how would society address the risk that elderly care might suddenly be diminished if a future government changed its mind?

Hypothecating an Internet sales tax to fund part of the NHS emphasises how both society and businesses change. There is no shame in the tax system changing to adapt. But will this Robin Hood approach appear in the autumn Budget?

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