2% Amazon Fee Increase as they pass Digital Services Tax to UK SMEs

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Amazon have announced that you will be paying the Digital Services Tax levied on Amazon by the UK Government. Your fees will rise by 2% from the 1st of September. Kindly, although the Digital Services Tax applies to revenue earned from the 1st of April 2020, Amazon won’t back date the passing the tax on to you and won’t ask you to cough up for the first five months.

The Digital Services Tax is levied on the revenues of search engines, social media services and online marketplaces which derive value from UK users. It’s a response to businesses which are domiciled overseas and operate paying less that what is perceived as their fair share of tax based on their revenue generated from their UK operations. The Government describes this as a misalignment between the place where profits are taxed and the place where value is created.

“Under the current international tax framework, the value businesses derive from user participation is not taken into account when allocating the profits of business between different countries. This measure will ensure the large multinational businesses in-scope make a fair contribution to supporting vital public services.”
– HM Revenue & Customs

Amazon are one of the large multi-national enterprises with revenue derived from the provision of an online marketplace to UK users and so are paying the new tax. However, whilst they’ll have to pay the tax on their own services and sales revenues in the UK, they have no intention of paying it on the revenues they generate from you so they’ll be stinging you in additional fees. Naturally this will almost certainly result in price increases and the consumer is ultimately the real loser.

This is of course the exact opposite of the UK government’s intentions. They intended a tax on large overseas businesses making billions in revenue and profits, not a tax on hard working small businesses struggling to make a living. Amazon passing the Digital Services Tax on to you as a merchant is exactly the reason that we believe the proposed 2% UK online sales tax is also a terrible idea… Amazon won’t pay it but you will. If the UK online sales tax comes in then, combined with the Digital Services Tax, your fees will see a total rise of 4% within a year.

“Earlier this spring, the UK government introduced a Digital Services Tax . While the legislation was being passed, and as we continued our discussions with the government to encourage them to take an approach that would not impact our selling partners, we absorbed this increase.

Now that the legislation has passed, we want to inform you that we will be increasing Referral fees, Fulfilment by Amazon (FBA) fees, monthly FBA storage fees and Multichannel Fulfilment (MCF) fees by 2% in the UK to reflect this additional cost. We will not apply the increased charges retroactively, but starting 1 September 2020, the fee types listed above will increase.”
– Amazon

25 Responses

  1. Is this something that has just been announced? I have not heard of this and we certainly don’t have another 2% in our margin to give to Amazon. We would certainly have to re-consider listiing on Amazon or just increase our prices by that 2%.

  2. VAT fraud , fake brands, foriegn traders, fake reviews, and counterfeit products and this is all policy makers managed.

    It’s a disgrace.

  3. Chris, can you clarify, as the way it is worded here isn’t clear.

    The article seems to say fees will go up 2%, eg. 10% fees will now be 12%. But then in the comments you say they’ll add it to the invoice, which is different. That would be adding 2% of 10% which would effectively mean 10% fees would go up to 10.2%, or to put it another way:

    £100 of sales. Old fee rate 10% = £10. New fee rate 12% = £12

    or

    £100 of sales at fee rate of 10% = £10 + 2% of that £10 = another 20p

    I think I know which, but you seem to be saying another to Darren.

  4. “…For example, on an item for which the referral fee on Amazon.co.uk is currently 15.0%, you will pay a fee of 15.3%…”

    Just take your current % fee and multiply by 2%. Pure magic! Lol

    69% * 0.02 = 1.38 + 69 = 70.38%

  5. If the Government’s intention was to tax the big companies, like Amazon, to secure a share of their UK profits, they have failed.

    Just like Trump’s tariffs on Chinese imports, the ‘tax’ will be paid by Amazon’s retailers and, inevitably, by the buying public.

    Congratulations to the UK Government, … you have managed to introduce a new tax on ecommerce whilst preserving Amazon’s profitablity.

  6. Chris I think the point is being completely missed in this article.

    My points are
    – Amazon will of course pass the fees on if they feel they can stay competitive.
    – Increasing Amazon fees is a good thing for competition. For example it allows my website to compete on price (it could anyway as prices on Amazon are crazy high)
    – This is the best way to extract a contribution to our society from the large, international businesses, in such a complex area of tax.
    – It’s the same for all sellers
    – If a consumer doesn’t like the price on Amazon they will purchase elsewhere – That’s a good thing as it decentralises power over the sector.

  7. This is supposed to be a TAX that Amazon etc pay to offset the TAXES they don’t pay now.

    Instead, they pass it on to their sellers [naturally] who have the “option” to add it to their prices. Except that most won’t as they have to say competitive.

    Once again, government misses its target by a country mile.

  8. Ebay will do the same. The customers will have to pay, we are already preparing to adjust our amazon pricing. Only lunatics will absorb the increase. Margin must be preserved.

  9. On the amount of Amazon fees +FBA that I paid last year on an Amazon turnover of €850k, it’ll be nothing. But that’s not the point. The point is Amazon are still avoiding a tax on more than 50% of their UK sales and effectively they know that in most cases, because of the cut throat nature of Amazon pricing and the scramble to win the buybox, where pence count, third party traders will not and cannot alter prices.

  10. Don’t forget though that Amazon will have to pay 2% tax on everything they sell on the UK website so whilst it may mean that we have to pay an extra 30p on a £100 sale, Amazon are going to have to pay £2.00 on any sales they make. As their own sales make up approx 50% of the .co.uk sites sales they are going to have to fund a reasonable amount our of their own pocket. Having said that, I do believe that the UK government should have looked at what they did with raising their fees in France and banned them from doing this is the UK.

  11. High turnover without maintaining margins is ridiculous, you are just a busy fool. Anyone can get can get a high turnover. Only profit matters.

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