AMAZON AND TAX:
It has wreaked desolation on traditional high streets
SOME of my best memories of being a little girl, and later a truculent teenager, are the weekly Saturday morning shopping trips I made with my mum to Binns in Middlesbrough town centre.
We bought my posh party frocks and Mum’s evening outfits for her cruise-ship holidays. The dress I wore for my graduation came from there, as did a series of good winter coats, bought in August before all the best ones were snapped up.
The store – a grand building on the corner of Linthorpe Road – wasn’t just any old shop, but a temple to local aspirations. When it was built in 1957, people flocked for miles to see its selfsupporting elliptical staircase, and the excited evening paper described it as Teesside’s answer to New York.
Well, it was Middlesbrough, not Manhattan, but it was where everyone who coveted a little social status went for their wedding gowns, their smart suits, their cutlery and their dinner service. Even when you couldn’t afford to buy something, you could nibble on a slice of gateau in the cafe, as Mum and I did, hoping to see and be seen.
Now, all those memories are about to disappear. The store, which became part of the ailing House of Fraser chain, is due to close next year, as is its counterpart in nearby Darlington.
POOR old Binns: it survived a Luftwaffe raid in 1942, but it is falling victim to the devastation that is engulfing the high street up and down the country. It’s no coincidence to be mourning a shop with so many memories at the same time as a rampant Amazon, that online retailer extraordinaire, is running up huge revenues – and keeping most of them out of the grasp of the UK taxman.
The decline of the great British high street isn’t a simplistic story. It’s a mix of punitive taxation through business rates, high rental costs, takeovers by rapacious private equity operators and other owners who loaded firms with debt and, it must be said, a fair bit of plain incompetence.
House of Fraser’s demise is in large part due to the fact it has been passed like a parcel from owner to owner and has been very badly run.
But the American marauders at Amazon are certainly not helping. The US company, currently worth a smidge under $890billion, is hurtling towards a $1 trillion valuation. Wall Street experts expect its shares to rise by more than 15 per cent over the next year, which would push the online giant over the trillion-dollar line.
The company has made its founder Jeff Bezos unspeakably rich with a £115 billion fortune, which begs the question of how it gets away with paying minimal sums in UK corporation tax and a fraction of the business rate burden of its high street rivals.
At this point, I have to make a confession. I adore Amazon – or at least I adore its speed, low prices and convenience. I’d even go so far as to describe myself as a low-level addict, but what I don’t adore are its tiny tax bills and its secrecy.
It’s hard to be definitive about Amazon’s finances here because of the complexity and lack of disclosure that surround its operations.
Filings in the US reveal its UK sales were £8.74billion last year, putting it in the same league as the John Lewis Partnership and Marks & Spencer. The difference is that it almost certainly pays far less in corporation tax and business rates.
What we do know is that one of its British subsidiaries, Amazon UK Services Ltd, which runs the logistics and customer services operations, had a corporation tax charge of just £4.5 million on profits of £72million, or a rate of about six per cent.
That must annoy companies like the John Lewis Partnership, which paid nearly £30million in corporation tax – more than six times as much – and at a significantly higher rate of 29 per cent of its profits.
This charge doesn’t relate to Amazon’s main retail operations, which are conducted through a UK branch of a separate company, based in low-tax Luxembourg.
Digging reveals it made a €55 million payment to tax authorities in the UK, Spain, Italy, France and Germany, but we don’t know how much of the money went into the Treasury coffers. The mystery surrounding Amazon’s tax affairs here is galling, for rival retailers, consumers and taxpayers.
The UK is one of its most lucrative markets outside of its native America, yet it feels no obligation to be open and transparent with its customers over exactly how much – or how little – it is contributing to our schools, roads and hospitals.
INSTEAD, anyone trying to make sense of its tax position is confronted with a labyrinthine corporate structure and a wall of silence. Amazon also refuses to reveal how much it pays in business rates. However, since it does not have a nationwide chain of high street stores, its bills are certainly a fraction of other retailers’.
Marks & Spencer for instance, is thought to have paid £184 million in business rates last year while poor old House of Fraser has an estimated tab for £120million. Amazon will say only that it pays ‘tens of millions of pounds’.
Cheerleaders for Amazon say it has invested billions of pounds in this country, created tens of thousands of jobs and that it is not breaking the law. So what? Obeying the law is a minimum standard of corporate conduct – and what of the jobs it has destroyed as it has wreaked desolation on traditional shopping streets?
The company is stretching its tentacles into virtually every area of commercial life, not only menacing retailers but also broadcasters like ITV with its Prime Video service.
It is even making inroads into the public sector with its first procurement contract, a £600million deal to supply public bodies in Yorkshire with a range of products from paperclips to bandages.
Demonising Amazon won’t save our high streets. They need a package of measures, including an overhaul of business rates, cheaper car parking and better public transport.
There also should be a new online sales tax, to help even the field between internet retailers and traditional shops. The proceeds could be invested in revitalising town centres.
As an Amazon addict, I’d like to change my current lovehate relationship with the company to love-love. I want to shop without feeling guilty about condoning its furtive tax antics and the shuttering of old-style shops left in its wake.
It may be one of the most successful corporations the world has ever seen, but unless it starts caring more about society and less about low tax bills, Amazon is at risk of moral bankruptcy.