Amazon will NOT be impacted by £500m digital services tax – but smaller retailers will be, HMRC admits

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Amazon boss Jeff Bezo and Rashi Sunak Photoshop image for artistic interpretation only

Retail giant Amazon will not by impacted by a new digital services tax – but traders who use the site will be, the HMRC has revealed.

In June Rishi Sunak signed a letter alongside counterparts in France, Spain and Italy declaring that tech giants needed to ‘pay their fair share of tax’.

But just seven months after the tax was announced in March, HMRC has revealed Amazon, which paid £293million in taxes on sales of £13.73 billion, will not be affected by it, The Times reported.

The tax, announced in April, was designed to make major firms with profitable businesses in Britain pay their share towards the nation’s public services.

However, Amazon, whose British tax bill last year was £293million on sales of £13.73billion, will not have to pay the levy on goods it sells itself, according to The Times.

Instead it will have to pay the two per cent charge only on revenues it receives from third party sellers that pay to use its marketplace platform.

The retail giant announced that it will pass on this cost in higher fees.

In effect this means it will not be liable for the charge and so gain a competitive advantage over smaller retailers that use its platform.

Conservative peer Lord Leigh of Hurley, told the Lords: “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.”

The British Independent Retailers Association has voiced its own opposition, warning the tax has penalised smaller retailers while giving Amazon the edge. 

An Amazon 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.’

The digital tax follows the failure to reach an international agreement on taxing technology firms that operate in many jurisdictions.

The EU will look at digital tax in 2021

France has called on the European Union to implement a digital tax by the first quarter of 2021 if an agreement cannot be reached within the Organisation for Economic Co-operation and Development (OECD) framework.

Speaking at a Eurogroup meeting of eurozone finance ministers in Berlin this morning, French finance minister Bruno Le Maire reiterated the need for an international tax system.

What European OECD Countries Are Doing about Digital Services Taxes

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