Amazon could be hit by online sales tax under business rates review

Patrick Daly, PA Political Correspondent
·5-min read

Amazon and other internet retail giants could be hit with an online sales tax in a move designed to claw back money the UK owes after heavy borrowing during the pandemic.

Treasury sources confirmed Chancellor Rishi Sunak is considering targeting companies that have done well out of the pandemic in order to pay back UK Government debts incurred while supporting industries through the coronavirus crisis.

The move is being considered as part of a review into business rates following a consultation last year.

Chancellor Rishi Sunak is mulling the online sales tax as part of a wider review in business rates
Chancellor Rishi Sunak is mulling the online sales tax as part of a wider review of business rates (Yui Mok/PA)

Amazon sales in the UK soared by 51% to almost £20 billion last year as lockdown restrictions buoyed the e-commerce giant, with people forced to buy online due to Covid restrictions.

Delivery firms such as Deliveroo and online retailer Asos were also among those to see profits spike during the lockdowns of the past 12 months.

The Sunday Times reported that leaked emails showed Treasury officials had summoned tech firms and retailers to a meeting this month to discuss how an online sales tax could work.

The move could be part of a double raid on Amazon as the paper said that Downing Street officials were working up proposals for an “excessive profits tax” on companies that have seen profits surge as a result of the crisis.

A Treasury spokesman said: “We want to see thriving high streets, which is why we’ve spent tens of billions of pounds supporting shops throughout the pandemic and are supporting town centres through the changes online shopping brings.

Britain's high streets have been badly hit by coronavirus restrictions
Britain’s high streets have been badly hit by coronavirus restrictions (Andrew Matthews/PA)

“Our business rates review call for evidence included questions on whether we should shift the balance between online and physical shops by introducing an online sales tax. We’re considering responses now.”

Despite Amazon’s booming sales, real estate adviser Altus Group said the retail giant had a tax to turnover ratio of just 0.37%.

Altus said, when looking across Amazon’s entire UK estate – including warehouses, offices and its pick-up and drop-off lockers – its overall business rates liabilities were estimated to amount to around £71.5 million at the start of the 2020/21 financial year.

In comparison, before the onset of the pandemic, the Centre for Retail Research said high street retailers paid around 2.3% of annual retail sales in business rates.

UK Government borrowing has soared during the pandemic
UK Government borrowing has soared during the pandemic (PA Graphics)

Robert Hayton, UK president of Altus, said Covid-19 had “driven online sales, accelerating the need to address the disparity in tax to turnover ratios”.

But Helen Dickinson, chief-executive of the British Retail Consortium, said ministers had to be careful not to hinder the ability for businesses to recover from the epidemic.

“The key to reviving our high streets is fundamental reform of the business rates system and we oppose any new taxes that increase the cost burden on the industry which is already too high,” she said.

“Economic recovery after Covid will be powered by consumer demand – the Chancellor should ensure he doesn’t introduce any new taxes that stifle this.”

Former minister Tobias Ellwood has urged the Government to make Amazon and other internet corporations “pay their fair share”.

In an article for the Mail On Sunday, the Commons Defence Committee chairman said high streets were being “emptied of shops” as Amazon paid “derisory amounts of tax and whose physical presence is merely a few giant warehouse hubs”.

He added: “The task may be daunting. But what better time than now, when governments seek ways to repair the huge economic damage caused by coronavirus?”

Amazon said it would not comment on the online sales tax reports.

A spokesman instead highlighted its investment into the UK, saying: “Last year we created 10,000 new jobs and last week we announced 1,000 new apprenticeships.

“This continued investment helped contribute to a total tax contribution of £1.1 billion during 2019 – £293 million in direct taxes and £854 million in indirect taxes.”

Mr Sunak is not expected to propose a so-called “Amazon tax” at his Budget on March 3.

Newspapers suggest he will instead look to extend furlough and the business rates holiday to support struggling businesses.

Labour is calling for him to announce any additional support for industry before next month in order to remove uncertainty.

Shadow chancellor Anneliese Dodds also wants the temporary 5% reduced rate of VAT for the hospitality, tourism and culture sectors to continue for another six months, or until three months after the lifting of health restrictions – whichever comes later.

The reduced rate is set to expire on March 31, when it will return to 20%.

Ms Dodds said: “The Chancellor has acted at the last minute time and again during this crisis – and that dither and delay has created uncertainty for businesses, cost jobs and threatened our recovery.

“Britain can’t afford the Chancellor to make the same irresponsible mistake all over again. He must announce these continued tax cuts now, not wait another month and risk even more job losses.”