Amazon should pay its taxes, but let’s just put it into perspective

Amazon should pay its taxes, but let’s just put it into perspective

Monday saw Margaret Hodge telling the Starbucks Executive that ‘he was immoral’ for his company avoiding tax in the UK. Revelations have flown in that other multinational corporations like Amazon, Apple, Facebook and Google have been avoiding their taxes as well leaving a black hole in the Treasury of nearly £1billion. I suppose that this raises lots of dilemmas about taxation. I’m not of the Olly Neville School that says that ‘tax is theft’ – it’s the price of doing business somewhere – but taxes should be lowered and simplified to be for the public good.

The CEO of John Lewis has also pointed out that it puts their business at a disadvantage because their competitors pay a disproportionately low amount of tax. If this does amount to an anti-competitive practice under Chapter II of the Competition Act, then Amazon and other companies should be fined for their actions. Although it’s legal, someone should not have a competitive advantage to the detriment of others just because they know how to duck and dive around the taxman. This should warn for Parliament that something is really wrong.

But, before a left-wing unionised lynch-mob starts to arouse, let’s put this into perspective. Amazon is the embodiment Lady Thatcher’s ‘popular capitalism’: to give consumers the benefits of variety and cheap products coupled with progress. Even twenty years ago, who would have thought it possible to buy books for a penny? Who would have thought that you could order a toaster and get it the very next day?

The reality is, Amazon has taken the mail order catalogue and made it more comprehensive, more efficient and more convenient. And we benefit. Take the Kindle: it took a previously discarded idea, and created a library that could fit into a handbag. Not only that, it has also enabled people to get classical literature for free (with help from the British Library of course). Tax avoidance aside – is the epitome of capitalism. It has spread to the many what was previously the preserve of the few.

And whilst it has made life more difficult for several British businesses, let’s not forget that other businesses have responded. The prices at Amazon are comparable to those at WH Smith or Waterstones. I bought two books at Bargain Books on Moorgate for £8 when on Amazon it would have cost me £12.58. I’m not going to know anything about their business plans, but if shops can find their market, they can survive so long as Amazon also plays fair.

And whilst making life more difficult for some businesses, it has given a lifeline to others. Part of our family business is in jewellery. Through Amazon we have a way to sell our products online and to get a wider market than our current wholesale business allows us to. This is also true for many other businesses that have the access to a wider market and have that opportunity granted to them. Amazon, again, has done others a world of service and we thank them for it.

The lessons are play fair. Government should also lower and simplify taxes otherwise big companies will find ways to get around them, but big businesses should still pay them. And to the Left, business is a force for good. It has been for a long time and it will continue to be for a long time to come.

5 COMMENTS

  1. Good question Alasdair.

    I haven’t said that they should be done separately, they should be done together.

    You can close many of the loopholes, which would get rid of the problem, but you’ve also got to look at what those loopholes try to do. Either they allow businesses to account for their losses by deferring them or charging them backwards to get a rebate from HMRC meaning that loses money can get some relief. Others like the Additional Investment Allowance give businesses that incentive to buy up to 25k worth of business property. Others like include tax deferrals that mean you pay tax in the future.

    If you closed the ‘loopholes’, you would make all those companies pay a better share of tax, but you would also reduce investment into the country. Given an economy depends on expenditure, it seems reasonable.

    Therefore if you lower taxes as well, there is still that incentive to invest in the country but the corporate tax system is more transparent.

    Tax havens are an occupational hazard. Their low rate of tax is effectively their only attraction (other than their tourism industries). To make our economies compete with these, lower taxes help, but so does added value things like better graduates and a wider variety of industries.

    What do you think?

  2. “Government should also lower and simplify taxes otherwise big companies will find ways to get around them”

    I’m curious what makes you think companies like Amazon would stop avoiding taxes if they were lower. Why should they? What company wouldn’t avoid tax if it knew it could get away with it?

    I’ve got nothing against Amazon myself – they’re a great company providing a useful service, one I’ve used many times. But I think they should pay more tax, and the way to address that is not by lowering it, but by removing loopholes and tax havens to ensure that current laws are enforced properly.

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