The UK government is allowing Amazon “to avoid tax on its own sales” by passing the Digital Services Tax to its own traders.
Amazon is being allowed to maintain its market dominance and avoid paying its fair share in taxes, according to prominent business groups who have slammed the HMRC’s handling of the Digital Services Tax as “outrageous”.
This tax was launched in April to ensure search engines, social media services and online marketplaces which derive value from UK users pay their fair share of taxes, adding a two per cent levy on all revenues with hopes of raising £500 million a year.
In August Amazon revealed that it would simply pass this two per cent tax along to sellers who use its third-party marketplace, effectively meaning it would not pay a penny on its own sales.
According to The Times, senior business groups, lawyers and former MPs took aim at the chancellor Rishi Sunak and the HMRC last night, branding it a “political failure and economic failure”.
Former conservative party treasurer Lord Leigh of Hurley said the tax “seemed to me to be absolutely outrageous”, adding that “it is clear that the UK government is not taxing Amazon properly and is allowing it to avoid tax on its own sales through its marketplace”.
“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.”
Another international tax lawyer branded it a “really dumb tax”, adding that the £500 million it collected a year was “very little”.
They added: “On the other hand it is complicating getting an international agreement on tax and risks sparking a trade war with the US. It’s a political and economic failure.”
In late August it was reported that the government was considering scrapping the tax because it would not raise enough money, though this was swiftly denied by the government who said it’s been “clear it’s a temporary tax that will be removed once an appropriate global solution is in place – and we continue to work with our international partners to reach that goal.”
Meanwhile Amazon, which paid £293 million on sales of £13.73 billion last year, maintained it had done nothing wrong.
A spokesman 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.”