MPS say Amazon outrage ‘shows we MUST reform business rates’January 10, 2019
Amazon outrage ‘shows we MUST reform business rates’: MPs pile pressure on ministers as web giant reveals a paltry £63m bill… far lower than its struggling High Street rivals
- The business rates system was drawn up before the advent of internet sales
- MPs demand a fix for system that clobbers High Street but spares web giants
- Campaigners say it risks killing off shops and ‘the beating heart of communities’
Outrage at the low business rates paid by Amazon heaped the pressure on ministers last night to overhaul the broken system.
The online giant was forced to reveal on Tuesday that, despite recording sales of £8.8billion, it paid just £63million in rates. That is far lower than its struggling high street rivals and a much smaller proportion of its income than the bills paid by many small retailers.
The revelation comes as high street shops struggle with soaring rents, shoppers switching to online firms and the worst Christmas sales figures in a decade.
MPs and campaigners said it shows that the business rates system, drawn up before the advent of internet sales, is ruinous for shops and risks killing off ‘the beating heart of communities’.
Amazon pays far lower business rates than its struggling high street rivals and a much smaller proportion of its income than the bills paid by many small retailers
They criticised the Government for putting reform off for almost a decade, and suggested that a tax on sales rather than premises could level the playing field. Amazon was forced by MPs to disclose a rates bill that amounts to only 0.7 per cent of its annual UK sales.
This is far less than Debenhams, which paid £80million in business rates last year on sales of £3billion, or Next, which paid £100million on revenues of £4billion. Amazon was also criticised for paying only £23.5million in corporation tax in 2017. It has been reported that the US internet retailer funnels £2 in every £3 of its UK sales through firms based in Luxembourg.
A Daily Mail campaign to save Britain’s high streets has called for a root and branch inquiry into business rates, for large companies overseas to pay their fair share of tax and for cheaper parking on the high street parking.
Experts warn that 10,000 shops could shut this year. HMV, which went into administration last month saying soaring business rates were partly to blame.
Critics say the playing field is uneven – firms such as Amazon typically rely on massive warehouses in cheap areas, where business rates are far lower
Last night MPs from all parties demanded that ministers overhaul the business rates system.
Labour’s Wes Streeting, a member of the Treasury select committee, said: ‘Some of Britain’s best known retailers have disappeared from our high streets, yet the Government is still clobbering them with business rates while big global giants like Amazon get away with paying peanuts.
‘This isn’t just about consumer choice, it’s about saving the beating heart of communities.’
High St suffers worst Xmas since the crash
High streets suffered their worst Christmas since the financial crash of 2008 with falling sales and a continuing shift to online shopping, it is revealed today.
Same store sales were down by 0.7 per cent in December compared to last year.
The figures confirm warnings that some retailers face being ‘smashed to pieces’.
In the three months to the end of December, sales of non-food products in stores fell by 3.9 per cent on like-for-like basis.
Online sales of non-food products rose 5.8 per cent in December compared to last year and account for 31.2 per cent of all non-food purchases.
Added together, like-for-like sales were down by 0.7 per cent. British Retail Consortium chief executive Helen Dickinson said it was ‘the worst December sales in ten years.’
Tory Bob Blackman, who sits on the housing, communities and local government committee conducting an inquiry into our high streets, said: ‘This demonstrates the need for a change in policy from business rates to a sales tax, levied on items sold rather than premises from where they are sold.’
Labour MP Peter Kyle, a member of the business, energy and industrial strategy committee, said: ‘What has been an anomaly is turning into a crisis. The high street is suffering while giant internet traders are raking in money part at the taxpayers’ expense.’
Liberal Democrat leader Sir Vince Cable said: ‘Business rates are a heavy burden on brick and mortar retailers, while big multinationals find it far too easy to avoid corporation tax. Our broken tax system deserves much of the blame for the struggle businesses face on the high street.’
Amazon paid business rates on 94 buildings, including out-of-town warehouses and offices in London. Most of the bill was taken up by the seven stores in its top-end grocery chain Whole Foods.
Critics say this highlights the uneven playing field – firms such as Amazon typically rely on massive warehouses in cheap areas, where business rates are far lower, while large stores face huge bills for helping to keep high streets alive.
Amazon, which has helped turn founder Jeff Bezos into the world’s richest man, defended its tax contribution yesterday, saying it was ‘proud to have created tens of thousands of good jobs and billions of pounds of investment’.
It said it had invested £9.3billion in the UK economy since 2010 and its corporation tax bill was lower than expected because of massive share awards to employees.
The Treasury has spent £900million on rates relief for small high street firms but retail groups say that is not nearly enough.
Mike Cherry, national chairman of the Federation of Small Businesses, said: ‘The tax system has failed to keep up with modern business or adapt to the rise of digital. It… is simply not fit for purpose.’
Meryl Halls, managing director of the Bookseller’s Association, said business rates allow Amazon to ‘game the system’, adding: ‘Amazon’s in-built advantages are breathtakingly large and systemically ruinous for traditional retailers.’
Kate Nicholls, chief executive of UK Hospitality, said: ‘The current unfair and outdated business rates system is resulting in a bloodbath on our high streets. [It] penalises bricks and mortar businesses.’
‘My butchers is for the chop’
Britain’s longest-serving butcher Pat, 80, with son Andrew, 55, and grandson Fraser, 24
One of Britain’s longest-serving butchers fears her business will be forced to close due to the decline of the high street.
Pat Jenkins, who has just turned 80, has been a butcher in her family business for more than 60 years and seen custom decline by a third in ten years.
Mrs Jenkins believes the struggling high street cannot recover and her business will close in the next decade.
‘I doubt there will be any small shops left in five or ten years’ time, including ours. The high street is dying, it definitely is,’ said Mrs Jenkins, who began working under her father at the business, Mason’s in Bouremouth, in 1958.
She believes supermarkets, poor parking, veganism and a high street that is no longer viewed as special have all contributed to the decline. ‘There used to be butchers and greengrocers and fishmongers, now it’s just estate agents and beauty salons here,’ she said.
Pat fears achievements like hers are headed for the chop thanks to the demise of the high street
Iniquitous injustice ripping apart communities
Commentary by Ruth Sunderland
This week an entrepreneur named Simon Key was forced to compose an announcement that the Big Green Bookshop, an independent store he co-founded a decade ago in North London, is to shut because of ‘absolute monster’ business rates.
As he was contemplating an uncertain future, Amazon – whose online might has been a scourge of independent bookstores – revealed in a letter to MPs that last year it paid £63million in business rates. That is a paltry sum in relation to its £8.8billion of UK sales.
Its corporation tax payments are even more derisory.
The most recent tax bill for its warehouse operations, Amazon UK Services Ltd, was a slender £4.7 million. And it didn’t even pay it all, deferring some of the charge – perfectly legally – and only handing over £1.7 million. You may not be surprised to learn that the Big Green Bookshop paid a higher proportion of its profits in tax and rates than the U.S. Goliath.
The letter revealing Amazon’s obscenely small direct contribution to Britain’s public purse exposes the gaping loopholes in our system, and the advantage to be gained by online firms which rely on massive out-of-town distribution centres with far lower rates than town centre bricks and mortar traders.
So it is that shameless overseas mega-companies get away with minimal payments, while costs are piled without mercy on high-street business owners.
Amazon – whose online might has been a scourge of independent bookstores – revealed in a letter to MPs that last year it paid £63million in business rates. That is a paltry sum in relation to its £8.8billion of UK sales
While it’s easy to identify this injustice, it is harder to work out what should be done. There are no easy or painless answers. But effective solutions must be found, and fast. Otherwise, the high streets will disintegrate as thousands of entrepreneurs who are the backbone of the economy are forced to give up the ghost.
Entrepreneurs, that is, like Simon Key, who set up his bookshop because there wasn’t one locally. He is continuing his business online, but independent bookstores are about more than just ringing up sales, they are about the soul of the community.
When his shop shuts, it will also be an end to the children’s drama workshops and visits by local authors. And what will arrive in their place?
Most likely a betting shop or a fast food shack.
The trouble is that there’s no room for sentiment on the British high street, which has suffered its worst Christmas since the financial meltdown in 2008, with companies like Marks and Spencer, Debenhams and House of Fraser expected to report very patchy trading over the festive period.
Yet as once-proud stores struggle with weak sales and rising rates bills, Amazon continues to gorge on the income it makes from British consumers.
This week it became the most valuable company in the world, worth just under $800 billion on the U.S. stock market.
Founder Jeff Bezos is the richest man on the planet with a fortune of £107billion. His divorce from wife MacKenzie, announced yesterday, will be the most expensive in history – but even after that he will be spectacularly wealthy.
To put that vast wealth – embellished by low tax bills in the UK – into perspective, he could, as an individual, buy Marks & Spencer 20 times over and still have billions in change.
Like millions of other Amazon customers, I am a fan of its low prices and fast deliveries. The company has invested billions of pounds in the UK and provided thousands of jobs, including high-level research roles, which is to be applauded.
Our tax system was devised for an era which no longer exists, when all businesses were ‘bricks and mortar’ companies
Yet these benefits are coming at an unacceptable cost. Amazon is doing nothing illegal. The problem is that the tax system here, and in other developed nations, is grievously outdated.
It was devised for an era which no longer exists, when all businesses were ‘bricks and mortar’ companies. Now the corporate tax and rates rules are unfit for purpose. In particular, too much tax is extracted through business property, giving a massive unfair advantage to those who operate largely online.
Amazon argues that it does pay national insurance, PAYE and other taxes. But it pays far too little through the corporate tax and rates system towards the schools that educate its workforce, the hospitals that treat them, and the roads its lorries and vans speed along with our parcels.
So what can be done? In his most recent Budget, Chancellor Philip Hammond announced some measures, including plans to cut business rates by a third for almost half a million small high street shops.
He also unveiled a ‘digital services tax’ on online operators, though this is only expected to raise £400million by 2021-22, which is chicken feed compared with their revenues.
These are welcome moves, but not enough.
The first obvious point is that Amazon and other Silicon Valley operators must be forced to come clean on the business rates and corporate taxes they pay here. At the moment, Amazon operates through a number of different UK subsidiaries and it is virtually impossible to make sense of its full tax situation.
City watchdogs should bring in a new rule that all companies above a certain size must disclose their total corporation tax and business rate payments in a simple format so the public can see exactly how much – or how little – they are handing over.
Armed with that information, consumers might decide that if lower prices online come at the expense of reduced tax funding for public services, they would prefer to take their custom elsewhere.
Corporation tax needs wholesale reform. It is charged on profits, which can easily be manipulated when offset against apparent losses, rather than sales, which are far harder to fudge.
As for business rates, they are a vital source of income for cash-strapped local authorities who need to pay for essential services.
So the money needs to come from somewhere.
One possibility is to cut, or even abolish, business rates and make up for the lost income by increasing the rate of VAT or introducing a new online sales tax. This would no doubt provoke objections that consumers, rather than businesses, would end up paying more.
The truth is that all taxes are, in the end, paid by individuals. The overall tax take would be the same, it would just be redistributed more fairly, with Amazon paying more and traditional retailers less.
There is scope for more imaginative measures, too, including a green ‘delivery tax’ on the vehicles used to deliver goods. There would need to be exemptions for small firms and sole traders to avoid penalising ‘white van man’ unfairly, but the delivery culture is adding hugely to emissions and road pollution.
A tax on the plastic packaging used by Amazon, on the same principle as the plastic bag charge in shops, is another possibility.
The fact is there are no magic wands to save the high street in its current form, but allowing Amazon to continue making billions to enrich its founder and its shareholders at the expense of our public purse should not be an option.
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