Philip Hammond’s proposals for a so-called ‘Amazon tax’ on online retailers addresses a legitimate problem.
When multinational businesses can cut their tax bills despite soaring profits, that’s a sign of an ill-designed and out of date tax code. The Chancellor is right to take corrective measures.
However, there are two parts of the Amazon tax story which are concerning.
The first is Hammond’s stated willingness to press ahead with a levy on web giants even before he can secure international agreement – it would be bad for the buying public and the Government both if precipitate action were to make the UK an unattractive place to invest.
The second is that one of the arguments being adduced in favour of the new tax is to “create a level playing field” with ailing bricks-and-mortar retailers.
One of the biggest challenges for modern businesses, and the governments that regulate them, is the constant pressure to innovate. Just as the big stores and out-of-town outlets superseded the high street, now they in turn are getting eclipsed by e-commerce.
But whilst these revolutions in shopping habits were undoubtedly painful for the owners and staff of old-fashioned businesses, there has always been one big winner: the consumer, who with every cycle has gained access to a wider range of goods and services at more competitive prices.
If the Chancellor does want to support traditional retailers, there are definitely pro-consumer ways of doing that, for example by looking for ways to ease the huge pressures created by rising rents and business rates. He could also see if there are more ways that the Treasury could support the Government’s own high streets strategy.
Unfortunately, when you wield the power of the state another, illusory alternative always presents itself. Instead of trying to come up with tax and regulatory systems suited to new conditions, why not use legislative brute force to try to squeeze the modern economy into traditional, easy-to-tax shapes?
We see this instinct at work whenever this Government talks about its plans to overhaul the treatment of the self-employed. In order to justify raising their taxes into line with traditional employees, there is much talk of giving contractors the same employment rights too.
On the face of it, this looks like an even trade. But it’s no such thing, and not just because the Government is pocketing the quid but expecting businesses to pay out the pro quo. It also diminishes (or even removes entirely) the ability of British workers to choose the alternative currently offered by self-employment, in favour of a single model the Treasury knows how to tax.
Piling costs onto online retailers in a bid to force their prices up towards parity with their high street rivals is a plan in the same spirit. It hurts consumers through higher prices whilst doing nothing to support and encourage the sort of transitions that high streets need in order to find a new, sustainable role in the 21st Century town and city.
So yes, tax Amazon to stop it exploiting obsolete international tax regimes. But don’t do it to ‘save the high street’ – not when the thing you’re really trying to save it from is the interests and preferences of Britain’s shoppers.