Amazon swerves new digital services tax

The HMRC has admitted that Amazon will not be affected by the introduction of the new digital services tax, however, small traders who useth site to sell products will be penalised.

UK Ministers had claimed that the tax which was announced in April, would make “global giants with profitable businesses in the UK pay their fair share towards supporting our public services”.

In June, Chancellor Rishi Sunak said that the COVID-19 crisis had made tech giants even “more powerful and more profitable” and that they needed “to pay their fair share of tax”.

However, The Times has reported that Amazon, whose total British tax bill last year was £293 million on sales of £13.73 billion, will not have to pay the tax on goods it sells itself. Instead, the tech giant will have to pay the 2% charge only on revenues it receives from third-party sellers that pay to use its marketplace platform.

Amazon will pass on this cost in the form of higher seller fees, meaning the firm will not be liable for the tax meaning it will gain a competitive advantage over smaller retailers using its platform. 

Yesterday, business groups accused HMRC of creating a tax that secured Amazon’s market dominance while failing to ensure that it paid its dues. A senior tax lawyer described the digital services tax as a “political failure and economic failure”.

The digital services tax was introduced after the failure to reach an international agreement on taxing technology companies that operate in many jurisdictions. The tax ensures that digital companies, such as search engines, social media platforms and online marketplaces, have to pay a 2% tax on all revenues derived from British users.

However, after concerns were voiced that this could adversely affect traditional retailers such as John Lewis, which also have online sales platforms, the government did not apply the tax to sales.

In turn, this has allowed Amazon to avoid paying the new tax on goods it sells directly. Last month, Google also informed advertisers that they would face a 2% levy on adverts running in Britain, rather than absorb the cost itself.

Tags: Amazon, HMRC

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