The latest figures show that online spending is at an all time high and is continuing to increase. In 2017, it was estimated that 1.66 billion people purchased goods online globally, with e-retail sales amounting to an estimated $2.3 trillion. Projections show that this will grow in the coming years; but, are these companies paying their fair share of tax?
According to the New West End Company in the UK, which represents over 600 retailers in london, they’re not. After the recent news that Amazon paid just €16.5m in tax on European revenues of €21.6bn in 2016, more and more traditional retailers are urging that are fairer system should be introduced to prevent more companies going out of business.
The idea of “digital taxes” tend to be met with a lot of opposition and scrutiny. However, the New West End Company argue that brick and mortar retailers have been unfairly penalised by high taxes for years. This is then reflected in their profits and property values. Meanwhile, businesses who operate out of town in warehouses pay very little when compared to town or city centre prices.
The disparity in taxes is even more shocking. For example, UK retailer M&S generated revenues of £9.6 billion in 2017 and paid around £184 million in business rates. Amazon on the other hand, had revenues of £7.3 billion but paid taxes of just £14 million.
The organisation say that a 1% sales tax should be imposed on retailers who are “wholly or largely online” through the VAT tax system. It’s estimated that this could raise an additional £5 billion every year and could help to fund a reduction in business rates that are paid by traditional retailers across the UK.
Of course, there are some issues with this proposal. For example, a lot of retailers get a lot of their revenues from online sales, but are still traditional retailers. Companies like John Lewis still contribute a lot in business rates, despite being largely online retailers. And when Amazon buy traditional retailers, like Wholefoods in the US or the proposed purchase of Morrisons in the UK, will it still be considered a “largely online” business?
The company have suggested online applying the tax to online sales, which could become very complex. The treasury seems reluctant when it comes to imposing reforms, and in addition, it’s still not clear if it would be successful in saving high street retailers from shutting down in the future.