Amazon set to escape new tax (but it will hit small traders)
AMAZON will effectively escape paying the new digital services tax – by passing the cost on to the thousands of small businesses that use its website.
The 2 per cent levy on the revenues of online marketplaces, search engines and social media services came into force in April.
Chancellor Rishi Sunak said it would make tech giants ‘pay their fair share’.
But that claim was called into question after HM Revenue & Customs admitted Amazon does not pay the tax on sales made through its website.
Instead, the company – which is used by more than 280,000 British firms to sell their products – only pays the levy on the online marketplace it provides each of these third parties.
It told small firms they faced higher referral, delivery and storage fees from September 1 to cover the cost of the tax. Google has also passed on the cost of the tax to advertisers. But eBay is absorbing the levy itself.
Amazon, founded and run by US billionaire Jeff Bezos, paid just £293million in tax to HMRC last year, despite raking in UK sales of £13.7billion.
Critics said its behaviour was ‘outrageous’ and accused the Government of botching the introduction of the tax.
Official guidance says the levy is aimed at ‘large multi-national enterprises’ serving UK customers, and the Treasury predicted it would bring in £515million annually by 2025.
But the British Independent Retailers Association said it had instead ‘ resulted in small sellers paying more and making less while Amazon gains further competitive advantage’.
Labour MP Darren Jones, who chairs the Commons business committee, said yesterday: ‘This really is ridiculous. Paying £293million in tax on £13.7billion sales is criminal – or it should be. Ministers need to get serious.’
Tory peer and businessman Lord Leigh of Hurley said: ‘This seems absolutely outrageous.
‘The Government is not taxing Amazon properly and is allowing it to avoid tax on its own sales through the marketplace. This puts retailers at a significant disadvantage.
‘The digital sales tax does not achieve its objective of yielding more revenue from the likes of Amazon as it is simply passed on to its suppliers.’
Lord Sikka, a professor of accountancy at the University of Sheffield, said the levy ‘taxes little people and lets big ones off’, adding: ‘The UK system of taxing corporations is broken and needs to be redesigned to ensure companies making profits here pay taxes here.’
An Amazon spokesman said: ‘We encouraged the Government to pursue a global agreement on taxation of the digital economy so rules would be consistent across countries and clearer and fairer for businesses. The way the Government designed the tax will impact businesses that use our services.’
A Government spokesman said it wanted ‘a global solution’, adding: ‘The digital services tax is a proportionate measure that ensures tech firms who derive value from the UK pay their fair share of tax.’