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Just Eat faces £10mln UK tax bill from Chancellor’s new digital sales tax

Published: 08:10 01 Nov 2018 EDT

chancellor budget
The tax is due to be introduced in April 2020

Online takeaway marketplace Just Eat PLC (LON:JE.) could be hit with a £10mln bill from the UK taxman if the new digital sales tax is brought in as planned in 2020.

Chancellor Philip Hammond unveiled the highly-anticipated levy on Monday as part of his Budget speech.

READ: The tax which could finally see Facebook and Amazon pay their fair share

It will see “established tech giants” – those which are profitable and generate global revenues of at least £500mln a year – slapped with a 2% tax on all sales they make in the UK.

Although Hammond didn't mention any names in his speech, the proposal was widely seen as an attack on Google, Facebook Inc. (NASDAQ:FB) and Amazon Inc. (NASDAQ:AMZN), which have for years been accused of not paying their fair share.

Unfortunately for Just Eat, it is also likely to be caught in the crossfire.

Peel Hunt reckons the FTSE 100 outfit will turn over £1.1bn in 2020, with around £0.5bn of that coming from the UK.

Pass the cost on

If those figures turn out to be correct, Just Eat faces another £10mln adding to its tax bill, which Peel Hunt thinks will bring its 2020 earnings down by 6%.

“There would be plenty of ways for Just Eat to make the tax back over the next few years through price rises and charging for things that today it gives away for free,” said the City broker in a note to clients.

“Both would either see the restaurants’ margins squeezed further or the restaurants having to put up prices, which would impact customers.”

Chinese and Indian restaurants on the decline

Peel Hunt reckons there is another issue which is arguably more important, though: the decline of Chinese and Indian restaurants in the UK.

Those two cuisines account for more than a third (38%) of Just Eat’s orders, but the number of those restaurants has fallen by 9% over the past three years (Chinese -15%, Indian -6%).

With the company reliant on those for a significant chunk of its earnings, if the decline persists, Peel Hunt warns that “it could impact Just Eat’s core business”.

Just Eat shares were up 5.3% to 639.8p in early afternoon trading on Thursday after the company reported a surge in third-quarter revenues earlier on in the day.

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