2% digital services tax gives Amazon competitive advantage over SMEs

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

“Bloody fuming”, “Scandalous”, and “So badly designed it’s ended up giving Amazon a competitive advantage” are some of the terms Amazon merchants have said today, referring to the news that whilst these small businesses will be paying the 2% digital services tax on their Amazon sales, Amazon themselves won’t be paying the tax on their own sales.

“The ability of large companies like Amazon to use their size and market power to organise to avoid taxes and to lobby to ensure an overwhelmingly favourable environment risks quietly drowning the many thousands of small businesses that depend on them for survival. It is time that more serious and direct regulation was put in place for these critical pieces of economic infrastructure.”
– Tamebay reader

The digital services tax was introduced on the premise that large internet giants weren’t paying what was perceived to be their fair share of taxes. Many are domiciled overseas and derive considerable value from UK activities but, by offsetting investment losses and moving profits overseas pay relatively little UK tax. It’s a complicated international conundrum.

eBay were the first and currently pretty much the only large internet giant to stand up, accept the 2% digital services tax and state that they would be paying it. No passing it on to their sellers, no questions, just a yes, it’s a tax and we’ll pay it.

Amazon immediately announced that they’d pass the tax on to the small Amazon merchants struggling to make a living by selling on their platform. 2% digital services tax? Not a problem, we’ll just tack it to what you pay with a fee increase. Far from it being a tax on an Internet giant it’s a tax on small businesses who will ultimately have to pass it on to consumers.

“This seems to me to be absolutely outrageous. It’s clear the UK government is not taxing Amazon properly and is allowing it to avoid tax on its own sales through the 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.”
– Lord Leigh of Hurley

Google like Amazon have no intention of paying the 2% digital services tax but they went one step further than Amazon. Rather than raising fees they decided to add it to your invoice. This means that if you set a budget with an ROI that makes sense to you, you’ll suddenly find the fees you were quoted for their services will be bumped by 2% on the invoice. It won’t show on any reporting or metrics, if you’re not aware of the fees then have fun in a year’s time explaining to your board why you massively overspent on Google as your reports won’t match the invoice the accountants received.

Even worse than passing the 2% digital services tax to merchants, Amazon will now have a 2% competitive advantage when selling products in competition to you. You will have to factor in your Amazon fees which will include the 2% digital services tax but Amazon on their own sales won’t have the 2% to worry about. On any individual product the amount is tiny as it’s 2% of the fees, not 2% of the sale price, but it’s still a competitive advantage.

Amazon are unrepentant saying it’s the governments fault for designing a tax that could simply be passed on to merchants and blaming them for not waiting for an international solution. In the mean time they have no intention of paying and that does beg the question is it any wonder the government are considering an online sales tax which will penalise everyone that sells online but is a tax Amazon will find a little bit harder to avoid paying on their own direct sales?

“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. As we’ve previously indicated, the way that the government has designed the digital services tax will directly impact the businesses that use our services.”
– Amazon

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I think I'm going to stop working and get into 'Buy to let' as it seems its the only business the UK government support. Whilst I stop working, someone else can work for me to pay for me to sit around.

ifellow • 14th October 2020 •

I think i will put the Rental into a ltd company and claim the dole, as id be unemployed. I think this makes sense after the total bashing small UK online sellers have had recently.

ifellow • 14th October 2020 •

Not forgetting to claim my 50K On the way out !

ifellow • 14th October 2020 •

Honestly you just couldn’t make it up

Jonah • 14th October 2020 •

its possible that the PBT (poor bloody taxpayer) would be paying your tenants' rent. makes sense - innit?

ed martin • 15th October 2020 •

I'm an amazon seller and we also have buy-to-lets. The government doesn't support us, all they're interested in is the rights of the tenants. More landlord legislation, more landlord taxes and less landlord protection. Time to get out of both.

Chris • 15th October 2020 •

We get that is Scotland all the time. Sturgeon just creates stupid rules to play to the mob. All it does is push up rents. Am glad most my property is paid for so I keep tenants in place with decent rents (£100 less a month than the average for area). I got out of Amazon a long time ago.

SAM • 15th October 2020 •

I am the same as Sam. The Rent on my 2 rental properties is below market value and i have zero unoccupied days in all the time i have had them. Its about having enough return as opposed to the maximum return (risk/reward). As for Amazon, whatever rules are put in place, they will legally make them work to their advantage or just plainly stick two fingers up!! Remember France a while back passed a law to ban free shipping on books in a bid to support the bookshop, what did Amazon do, set the charge at 1cent!! Every prime day in Germany, the Amazon workers go on strike, so Amazon built Fulfillment Centers on neighboring countries and fulfill from there. And they know that a global agreement will never happen as one thing i have learnt with expanding into the US, is that the US, as the premier Capitalist Economy, only does Capitalism on their terms!! Apple, Google & Amazon are too big for any one country to do anything about. This brings me back to my rental analogy, despite them being the richest biggest companies in the world, they have enough money, but they want more.

lee pearce • 17th October 2020 •

The comments here... always complain & complain. You have BTL ? I still have mortgage for next 16 years, no BTLs, small LTD to survive etc. You want big money & easy live.. then perhaps go into corridors where politicians walk and get off this blog pages as well!

NorthCrystal • 17th October 2020 •

Seems to be more buy toi letters here than market place sellers. Very strange.

Ifellow • 17th October 2020 •