Is it time for an Amazon Tax?

Is it time for an Amazon Tax?

by Murdo Fraser
article from Friday 29, September, 2017

THE RECENTLY PUBLISHED Barclay Review of Non-Domestic Rates for the Scottish Government contained some interesting ideas about how the current rates system might be reformed. The review stopped short, however, of recommending a wholescale replacement of the existing rating system with alternative means of raising revenue from business, an outcome which disappointed some observers.

Non-domestic rates are a relatively easy tax to understand, and comparatively simple to collect. Being based upon property values, they are difficult for business owners to avoid. Yet the imposition of a property-based tax on business does throw up a number of anomalies.

The best example of this can be given in relation to book retailing. Increasingly, books are bought online as opposed to the tradition of using high street bookshops; indeed we have seen a dramatic decline in the number of high street book retailers in recent decades. This should be no surprise, for the establishment costs of a high street bookshop are much higher than those of an online seller.

Any good bookshop requires to carry a substantial level of stock to provide sufficient range to attract customers. Inevitably this means an expansive floor space, which in most Scottish high streets translates into a hefty rateable value, and therefore a rates bill that might well fall outwith the reach of the Small Business Bonus Scheme.

The online book retailer may operate from an out-of-town warehouse of significantly less value, paying a relatively much smaller non-domestic rates bill. Alternatively, a small book retailer may be operating from home, from a spare bedroom, or even the garden shed, paying no rates at all.

So here we see unfair competition. The high street book retailer is supporting a local economy, attracting customers to a town or city centre environment where there are other retail businesses depending on mutual support, whilst the online retailer performs none of these functions.

The most egregious example of an online book retailer is, of course, the behemoth that is Amazon. There are many criticisms of that company, from its working practices to the way it manages to reduce its tax bill, yet who amongst us can in all honesty say that we are not customers?

The convenience of having books and other goods delivered directly to our home within a very short space of time is, for most people, enough to overcome our qualms about what Amazon stands for, and what it does to our high street. We may all be Amazon customers, but deep down we hate ourselves for it.

Not only does Amazon, and for that matter other online retailers, benefit from a substantial tax advantage over high street businesses because of the way that non-domestic rates operate, but we also have a situation in Scotland where Amazon have been the beneficiaries of substantial grants of public money from the SNP government (pictured) to support their activities. Only recently has the SNP accepted that in future such support should not be paid out to companies unless they can demonstrate that their employment practices meet a required standard.

But why should the tax playing field not be levelled? Why should online retailers be given tax advantages not available to those located in the high street? This was not an issue considered in detail by the Barclay Review, but I understand that its members took the view that any specific tax on internet sales is not something that could operate in Scotland alone. Indeed, this makes sense, as any internet business taxed by the Scottish Government would simply relocate its activities south of the Border and continue to deliver by mail order to customers in Scotland without penalty.

So if we are to have a specific tax on internet sales, to reflect the fact that such businesses do not pay their fair share of non-domestic rates, then that needs to be levied at a UK level. And it may well prove to be an attractive option for a Conservative Chancellor. An additional sales tax of, say, 5% on all goods sold over the internet within the UK would not only raise substantial additional sums, it would also help reduce the unfair competition between the online retailers and those occupying the high street.

Moreover, I believe that such a tax proposal would actually be popular. Even those of us who buy from Amazon don’t really like the company. A new “Amazon Tax” might make us feel a bit better about buying online, or it might encourage us to get off our backsides and get down the high street and support our local economy.

If we are serious about the regeneration of local high streets, and concerned about changes in the retail economy, then an Amazon Tax might well be the way forward. I hope it is something the Chancellor will give active consideration to.

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