You may have seen the news that Amazon recently became the world’s second trillion-dollar company, following hot on the heels of Apple.
And you might have also heard that Chancellor of the Exchequer Phillip Hammond has been ramping up calls for Amazon to pay a ‘fair share’ of tax on the enormous profits they make every year. Tied up in all of this is the current state of the UK high street, with major firms and legacy brands like Mothercare, House of Fraser and others plunging into administration.
So, we’ve put together this piece telling you what the proposals for an ‘Amazon Tax’ are and what it could mean for the retail giant.
The Origins
The amount of tax Amazon pays in the UK – and other European countries – has been a topic of hot debate for a good few years.
Initially, the UK government didn’t have much to say about the matter, and the assumption was that the sheer economic weight and input of Amazon justified its low tax payments. But public sentiment and that from within government have shifted over time, and recent headlines about Amazon’s still negligible tax payments have brought an added edge and urgency to the debate.
As a result, Phillip Hammond has stated he agrees with the positions of France and Germany – namely, that Amazon should pay a proportional, fair amount of tax on the money it makes. As stated above, the UK high street is part of the issue, with traditional retailers struggling to pay rents and meet their tax obligations on a large scale. Many deem it unfair that Amazon makes colossal sums every year as an online retailer and pays little tax, while bricks and mortar retailers struggle for survival.
The Proposals
As of now, Phillip Hammond and the UK government haven’t set out or proposed any concrete measures to deal with the Amazon tax issue, but Hammond has provided some interesting insight into the actions the government may take.
The main obstacle to levying Amazon with the ‘right’ amount of tax comes from the fact that Amazon is an international company. They have warehouses and thousands of workers in the UK, yes, but they aren’t a UK-based company. As such, international tax arrangements are in place, and any solution would have to overcome this barrier.
What the Chancellor has said, is that the government has to “rebalance the tax system to be fair across these new ways of doing business”. Regarding practical action, he pointed to the EU discussions around taxing online businesses based on value but if this is practical or not remains unclear. Hammond has also discussed temporary tax measures to bring more parity to the retail industry until the point that the government can overcome the international tax agreements currently in place.
What Does it Mean for Amazon?
Thus far, Amazon is bullish about the benefits it brings to the UK in terms of jobs – 25,000 staff in the UK and rising – and infrastructure investment, which currently sits at just over £9 billion.
If bespoke tax arrangements are put in place by the Government, it’s unlikely Amazon would give up this considerable investment. But they may very well challenge the legality of singling out a business for special tax measures. Whatever the outcome, it’s clear Amazon feels it contributes enough to the UK economy to excuse its low tax payments, with the government taking the opposite position. Something will have to change, and the ultimate result could be a compromise somewhere in between the two positions.
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