We should be outraged by Amazon, but not because of its tax bill

(Source: Reuters)

Amazon's corporation tax bill of £2.4m in the UK for 2012 has upset many who note its comparatively high sales volumes. But we should question the idea that Amazon paying more tax would always be a good thing. Corporations benefit the UK in other ways than their contributions to the Treasury.

It may well be that Amazon is better at using our money than government. After all, voluntary contributions to the Treasury run very low, while customers in the UK voluntarily gave Amazon £4.2bn for its services. It is for these goods and services that we should value business, not their tax bills.

By employing innovative (and entirely legal) schemes to minimise the burden of taxation, Amazon is able to pass on those savings to its stakeholders. There are however huge problems with our tax system. That Amazon has resorted to routing its business through Luxembourg shows up how small businesses are penalised by high taxation in the UK.

What should be more shocking is that our government is supporting an immensely popular and successful business. Amazon received £2.5m in government grants in 2012 (The Times). In an effort to pick winners, politicians have created a mess of taxes, subsidies and exemptions that have allowed Amazon to receive more in grants than it pays in corporation tax. City A.M. editor Allister Heath argues that this tangled web needs to be cleaned up:

All tax rates are too high, on the poor and on the rich. The tax system is trying to raise too much, because it is so inefficient and counter-productive, and because spending is too high. There is only one long-run solution to reduce avoidance: we need a much simpler, lower and more transparent tax system. We need a flat tax with a wide base, where all income – from labour or capital – is taxed at the same, low rate, with no loopholes. Until we adopt such a system – of the sort outlined by the 2020 Tax Commission, which I chaired – injustices and inequities will remain rife.

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