Coverage of politics at Westminster is obsessing about every minor detail of the Brexit discussions, while very little attention is being paid to the Budget, only a few weeks away. What taxation changes do we want to see from the Chancellor of the Exchequer? The challenge he faces will not be easy. Actually, the overall financial position of the Exchequer is rather better than we might have expected a year or two ago (despite the ubiquitous and ridiculous ‘fear’ predictions emanating from the Treasury before the EU Referendum in 2016). But the recently announced massive annual £20 billion increase in NHS investment will have to be paid for. There is also a real need to increase investment in social care and defence.
So where is this extra money to come from? Over recent weeks I’ve received hundreds of emails calling for an ‘Amazon Tax’, based on the belief that this would make a significant difference. It will not. Because Amazon is such a massive worldwide business, with a market capitalisation of over £1 trillion, there’s a widespread assumption that paying just £4.6 million in Corporation Tax is in some way ‘cheating the system’. It so happens that I too hope that the Chancellor will find a way of extracting more tax out of the several worldwide companies who do not have a High Street presence, but, as always, these internet based campaigns are not what they seem.
Firstly, it’s not Amazon (the worldwide monolith) which is based in the UK - it’s a subsidiary (Amazon UK Services) and it’s run from about a dozen giant warehouses. Its profits in the UK are actually well below £100 million, a lot of money but not a base to make any significant boost to Treasury income. Even so, its tax bill still seems lower than it should be. But it’s important to understand why. In 2000 the then Labour Government introduced a scheme to encourage companies wanting to create schemes giving shares to employees. Any company which did this could set the cost against its Corporation Tax liabilities. I approved of this scheme. I still do. Do we really want to stop this scheme. Personally, I think it a great idea to give employees a real stake in the success of the business they work for.
Amazon (and several others) are also said to have an unfair advantage over other more traditional retailers by paying lower business rates. Now it’s true that Amazon has developed a business model which is not based on the High Street, but is located in properties where business rates are more affordable, enabling its prices to be more competitive. It is a very strange campaign, supposedly acting in the interests of the people of the UK, which calls for the cost of what we buy to be forced higher - deliberately hitting consumers pockets.
And finally, I cannot let this issue pass without a comment on the bizarre position adopted by the Archbishop of Canterbury, head of the Church of England, publicly criticising Amazon for its business model - only for us to discover that the Church itself has several millions of pounds invested in Amazon. And then criticising the employment practices of Amazon, which are replicated by the Church itself. This is as blatant an example of hypocrisy as you’ll ever see! Yes, I hope the Chancellor can find a way to raise more tax from the Amazon’s of our world. But let’s not pretend it’s straightforward or would make any significant difference.