Amazon warns small business will pay price for Digital Services Tax

Internet giant could pass cost of 2% digital tax imposed by Conservative government onto small business, just as it has done in France

Amazon has said that it could pass the cost of the government’s planned 2 per cent digital tax onto small businesses that sell through it.

The 11 March Budget is expected to introduce the “digital services tax”, a 2 per cent levy on UK revenues of technology businesses, which pay little or no domestic corporation because their European headquarters are based in tax havens such as Ireland or Luxembourg.

The government expects the new tax to bring in almost £500m a year.

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However, Amazon UK country manager Doug Gurr, told the Financial Times that the tax could raise costs for small businesses which use its sales and delivery platform.

When France introduced a 3 per cent levy in July 2019, Amazon hiked its charges for small business sellers by the same amount.

Gurr said: “If you are not careful in the design, these taxes can actually hit all of the small businesses that use our services. The majority of sales on our marketplace are independent businesses. If that tax is passed on to them, that is quite a significant hit.”

In America, more than 1.9m US-based small and medium-sized businesses (SMBs) generated more than $160bn through Amazon in 2018. Indeed, SMBs sell more than half of all products on Amazon.

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According to the internet giant, these businesses – many of which are side hustles run by hobbyists – on average, earned $90,000 a year in sales. On average, US small business owners sold 4,000 items a minute via Amazon and the to-selling categories were health and grooming, home and beauty.

However, last year US treasury secretary Steve Mnuchin told CNBC that Amazon “has destroyed the retail industry across the United States”.

Rather than introduce a national digital tax, Gurr said that the UK should wait for a “supranational approach” to taxing digital services – something the OECD hopes to agree on this year. But negotiations have ground on so slowly that 35 of the 36 member countries have decided to go it alone and implement their own tax levies.

Amazon earned £10.9bn in UK revenues in 2018 but did not declare how much corporation tax it paid.

The implication is that small businesses selling through the platform in the UK generate more than £5bn between them through the platform.

Further reading

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Tim Adler

Tim Adler is group editor of Small Business, Growth Business and Information Age. He is a former commissioning editor at the Daily Telegraph, who has written for the Financial Times, The Times and the...

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