Wednesday 14 October 2020 11:18 am

Amazon to escape UK tech tax as global crackdown falters

Amazon is facing fresh scrutiny over its tax liabilities after it emerged the tech giant will not be affected by the government’s landmark digital services tax.

In April ministers unveiled the new tax — which charges a two per cent levy on the revenue of internet companies — saying it would ensure companies contribute their “fair share” to support public services.

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But Amazon, which paid just £293m in UK tax on revenue of £13.7bn last year, will not have to pay the levy on goods it sells itself.

It will have to pay the tax on revenue it receives from third-party sellers using its platform. However, the company has already said that it will pass on this cost to smaller retailers in the form of higher fees.

However, the tax framework, which first reported by the Times, has sparked complaints that the government is allowing Amazon to avoid paying its fair share of tax.

Tory peer and former party treasurer Lord Leigh of Hurley branded the move “absolutely outrageous”.

“It is clear that the UK government is not taxing Amazon properly and is allowing it to avoid tax on its own sales through the marketplace,” he told the Lords.

“This puts regular 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 in the marketplace, which have to absorb this tax in their margin.”

Outlining the new regulation in April, ministers emphasised that the digital services tax was intended to be a temporary measure, arguing that a unilateral global framework was a more sustainable solution.

But hopes of new global rules were dealt a blow earlier this week when the OECD, which has led negotiations over a new tech tax, said a deal would not be agreed before the end of the year.

“Now that the OECD process has failed the government has been left with a policy it did not want and which is deficient in a number of ways, not least the fact that many companies which are involved in tax avoidance schemes are not covered by it at all,” said George Turner, executive director of Tax Watch.

“What we should be doing now is coming forward with new, more comprehensive policies which would ensure all companies pay taxes in the UK on profits they earn in the UK.”

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An Amazon spokesperson said: “Like many others, we have encouraged the government to pursue a global agreement on the taxation of the digital economy at OECD level rather than unilateral taxes, so that rules would be consistent across countries and clearer and fairer for businesses. 

“As we’ve previously indicated, the way that the government has designed the digital services tax will directly impact the businesses that use our services.”