Digital Services Tax

Retail giantAmazon will NOT be impacted by £500m digital services tax. However the smaller retailers will be, HMRC admits. However, traders who use the site will be, the HMRC has revealed.

The Guardian claims the online retailer will only have to per a 2% charge on revenues it receives from third-party sellers trading on its marketplace. 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’.

Seven months after the tax was announced, HMRC has revealed Amazon, paid £293million in taxes. On sales of £13.73 billion will not be affected by it.

Digital Services Tax

The Digital Services Tax was announced in March. With the hope that Facebook, Google and Amazon would make a ‘fair contribution,’ the Treasury had said. ©AP

  • Two per cent on tax on internet giants will not impact Amazon, HMRC admits 
  • Treasury said Digital Services Tax would make companies pay ‘fair contribution’
  • Business leaders say the tax is penalising smaller companies who use Amazon  

With Amazon expected to cover the cost by charging higher fees. This results in putting it at an advantage compared to the businesses that use the website.

Should the Digital Services Tax be ditched?

In August it was reported that the Treasury was considering ditching the tax. Mr Sunak concluded that the £500million a year it is expected to raise is a pinprick compared with the hundreds of billions of pounds dent to the nation’s finances caused by the coronavirus epidemic.

Business groups have criticised the levy following this latest revelation. Lord Leigh of Hurley told the House of Lords: ‘It is clear that the UK government is not taxing Amazon properly. It is allowing it to avoid tax on its own sales through the marketplace’.

‘This puts regular retailers at a significant disadvantage. The digital sales tax does not achieve its objective of yielding more revenue from the likes of Amazon. However, it is simply passed on to its suppliers in the marketplace, which have to absorb this tax in their margin.’

Announcing it earlier this year, the Treasury described the levy as ‘a new 2% tax on the revenues of search engines. Including, social media services and online marketplaces which derive value from UK users’.

Businesses should make a fair contribution

The Government department hoped the measure would ‘ensure large multinational businesses in-scope make a fair contribution to supporting vital public services,’ it wrote in March.

The British Independent Retailers Association has voiced its own opposition. They warned 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. Rules would then be consistent across countries and clearer and fairer for businesses.’

IT does not have to be taxing

Who is likely to be affected? Large multi-national enterprises with revenue derived from the provision of a social media service, a search engine or an online marketplace to UK users. This is you if your website turns over more than £25 million in the UK! Hats off if you fall into this category. You are one of the few as the Government had some very specific targets in mind when devising this tax, introduced by the Government as of 1st April 2020.

Unfortunately, we are unable to help Amazon with their tax problems! However, LIS clients do benefit from our years of IT experience. Contact the LIS Help Desk to see how we can help your business. With an approach based on the socially distanced human touch, our knowledgeable team will help you achieve your business goals.

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