Don’t tax Amazon – cut rates for the high street
The idea of a tax on online retailers, as proposed by the Chancellor on Friday, will doubtless prove popular. At a time when high street retailers such as House of Fraser and Marks & Spencer are struggling against online competition, no one likes to see Amazon undercutting them further by craftily reducing its tax exposure. But why assume that taxes should be levelled up rather than down? At a time when Britain needs to attract more tech companies, wouldn’t it make more sense to help traditional retailers by cutting their taxes, too?
Taxes in Britain have risen to a 49-year high. The recent spending increases were individually popular – few politicians publicly opposed giving more money to public sector workers, the Armed Forces or the NHS – but they all mount up. This year, tax will account for 34.3 per cent of GDP which, as the TaxPayers’ Alliance points out, is a higher proportion than in any fiscal year since 1969-70.
Of course, a lot of people want to tax Amazon for ethical, rather than economic, reasons. But a company is no more obliged to hand over additional voluntary contributions than you are. Yes, Amazon employs clever accountants to reduce its bills. But if paying only what you legally owe is tax avoidance, then buying an Isa is also tax avoidance. If there are loopholes, blame the politicians who created them.
Why, though, judge a business wholly by how much it hands over to the Exchequer? The primary value of Amazon is that it makes our lives easier. It frees up our time to spend with our families, indulge our hobbies or, indeed, earn more. It frees up our money to spend on other things, stimulating the whole economy. It boosts Britain’s GDP, while complying with our laws. I suspect many of its critics use it gladly.
In any case, it is misleading to talk of firms paying taxes. A corporation no more pays corporation tax than your car pays the vehicle tax or your TV set the licence fee. Taxes are paid by human beings. A tax on internet sales would fall, primarily, on people who buy things online – ie, almost all of us.
To flip it around, cutting taxes for bricks-and-mortar retailers would benefit their employees, their suppliers and their customers – again, almost all of us. It works in practice as well as in theory: our record levels of employment owe a great deal to recent cuts in corporation tax.
Could we afford further cuts when we are still borrowing a billion pounds a week? Yes. First, we could spend less: scrapping HS2 alone, for example, would save more than the total corporation tax take. Secondly, we could cut tax rates to boost tax revenues. Lowering corporation tax from 28 to 19 per cent saw a 25 per cent rise in receipts. Cutting top-rate income tax from 50 to 45 per cent saw a 7 per cent rise in receipts from top-rate payers. Conversely, the recent hike in stamp duty cost the Treasury money.
There is a way to make Amazon pay more – and to boost our economy into the bargain. We should reduce, flatten and simplify our taxes.
At a time when Britain needs to attract tech companies, wouldn’t it make more sense to help traditional retailers by cutting their taxes?