The tax system needs to be reformed to give a level playing field for all retailers or we face seeing our high streets cease to exist as shopping destinations.
Jeff Bezos, founder of Amazon, is not only the richest man in the world with a personal fortune of $150billion (£116billion) but when inflation is taken into account is now judged to be the wealthiest person in modern history. Richer than the notorious US Robber Baron businessmen of a century ago.
He’s got so rich because his company pays so little tax compared to its profits in each and every country it functions in.
Last year Amazon’s UK tax bill fell to just £1.7million despite its pre-tax profits leaping from £24.3million to £72.3million.
All of us in effect are subsidising his tremendous wealth by paying more tax in proportion to that paid by his company in the UK. The average worker pays 40 per cent of income in direct and indirect taxes. Amazon is paying 2.4 per cent in tax on its profits.
In the meantime House of Fraser is on the brink of collapse as potential investors think twice about committing to high rents and rates on its 59 shops. If the company cannot find a rescuer, 17,500 retail jobs are at risk.
Sadly the 169-year-old business is teetering on the edge because it sold all its freehold sites and is committed to expensive rental contracts. The price of running bricks-and-mortar shops has never been more costly as rising business rates are linked to rental value.
Amazon responds by saying it pays exactly the tax it is required to by law. “Corporation tax is based on profits, not revenue,” says a spokesman, and that enables the company to spread its vast income around to avoid paying more tax.
But shops sited in high streets have no choice but to cough up business rates that are typically 50 per cent of annual rent.
Traditionally the rates were meant to pay for services provided by the council but nowadays traders are getting less and less for their money. It doesn’t even cover rubbish removal, with most shops having to pay extra for this on top of everything else.
The production line at Amazon
Amazon are contributing to the death of the high street
Instead business rates are now swallowed up by local councils to pay for our growing social care costs since central government shifted that burden on to them. That’s why shops have to charge more for goods than online retailers.
Through sky-high business rates, high street traders and their customers are subsiding the cost of looking after the old and the vulnerable in this country. That might be fair enough but it means that wealthy online retailers are not paying their fair share of social costs in the countries they profit in.
In the meantime Jeff Bezos gets richer and richer, spreading his tentacles into space travel and buying The Washington Post, giving him huge political influence in the US.
Amazon even wants to clog our airspace with drones delivering their parcels to us rather than human beings.
One hundred years ago the US government introduced antitrust laws to limit the power and malign influence of the Robber Barons whose companies had grown so big that they threatened to monopolise and distort their markets.
It seems that Amazon and the other online giants are at exactly this point in their growth and need to be reined in. I am all for governments leaving markets alone but in this instance an out-of-date business tax is being allowed to destroy the high street to the huge benefit of a handful of online retailers.
“The Government is years behind on the need to implement new legislation to help level the playing field across the retail sector,” says Lucy Simon, an independent retailer and high street campaigner.
“With last year’s Rates Review a very small percentage of rates decreased but the majority were restructured in a way that they have mostly increased. Many businesses are no better off overall. This higher taxation is killing high street business by the day.”
Meanwhile in my hometown of Bath more and more shops and restaurants are closing because of the double burden of high rents and rates.
In London’s West End a group of stores including Selfridges, Marks & Spencer and Fenwick are fighting back by suggesting that the answer is to shift more of the tax burden on to wealthy online companies.
The New West End Company lobby group is calling for a 1 per cent tax on online business revenues that could raise £5billion.
House of Fraser store is on the brink of collapse
This would allow the Government to cut business rates by an average 17.5 per cent at no cost to the Treasury. It would only be levied on businesses that largely function online so high street retailers, who also have a web presence, are not taxed twice.
An online sales tax would help erode the unfair advantage that web retailers have over high street traders. It would also generate more money to pay for the rising social costs we all face in this country.
At the moment global web giants are avoiding their local social responsibilities. Until the Government gets a grip of the situation I have stopped buying books on Amazon and get them at my local book shop.
It might cost a little bit more but I have a good conversation with the owner and even a decent cup of coffee. That’s worth a lot more to me and keeps a few pounds out of Jeff Bezos’ coffers.