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Amazon looks set to pay 25% tax on UK profits following announcement from Chancellor George Osborne

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Amazon looks set to pay 25% tax on UK profits following announcement from Chancellor George Osborne
Amazon looks set to pay 25% tax on UK profits following announcement from Chancellor George Osborne
Amazon looks set to be taxed on its UK profits following an announcement from Chancellor George Osborne this week.

Making his autumn budget statement to the House of Commons this afternoon, the Chancellor unveiled a 25% tax on the UK profits of technology and other companies that use the internet to sell in this country but "divert their profits elsewhere" through the use of headquarters based in other European countries. Osborne said the measure would raise £1bn over the next five years.

In recent years, companies including Amazon, Google and Starbucks have been heavily criticised for basing European headquarters in low tax territories such as Luxembourg with the effect that they pay relatively low levels of tax in the UK despite making strong sales in this country. Amazon is the UK's biggest online retailer. According to a Guardian investigation last year, Amazon paid £3.2m in corporation tax on sales of £320m in 2012. However, it said, Amazon had told investors it turned over £4.2bn in the UK. In October, the BBC reported, the European Commission announced it would examine the tax agreement between Amazon and Luxembourg, home to its European headquarters.

Osborne said the tax, already dubbed a 'Google tax', was designed to remove a situation that was unfair to UK businesses. "My message is low taxes and taxes that will be paid," he said.

If Amazon is hit by the announcement, it may mean the retailer can no longer compete on price in the same way that it has. Amazon has played a key role in bringing Black Friday discounting to the UK: last week UK retailers cut prices and shoppers bought as never before during the event, imported from the US, when it fell on November 28.

Today Chancellor George Osborne also announced that next year would see a £1,500 discount on business rates for retailers and other high street businesses who occupy premises with a rateable value of £50,000 or less, up from £750 previously. He also said there would be a full review of the structure of business rates.

The British Retail Consortium (BRC) had previously called for the business rates system to be overhauled by 2017, putting forward options including a charging system that replaces a property tax with a tax related to the use of energy, or introducing clearer charging bands.

Multichannel retailers, who sell online and through stores, believe they are disadvantaged when competing against pureplay retailers who only sell online because rates on high street premises are more expensive than those on warehousing.

Helen Dickinson, British Retail Consortium director general, said: “We very much welcome the commitment to undertake a comprehensive review of the business rates system. We want a system that brings investment and jobs to the high street without punishing retailers who trade online. The retail industry is the largest rates payer, contributing over a quarter of the total rates tax take.

“Today’s short term support package will be of enormous help to those struggling to keep their businesses open on the high street."

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