Amazon has confirmed it will ‘bypass’ the new digital services tax (DST) announced by the UK Government.
The eCommerce giant will not see an increase in tax on items it sells direct to consumers. However, third-party sellers that trade products via the Amazon marketplace will see a 2% jump.
HMRC said it would not levy the new tax on sales as that could negatively affect traditional online retailers, such as John Lewis and Tesco, according to The Times.
The tax was introduced in an effort to force tech giants such as Amazon, Google, and Facebook to pay more in tax in the UK. Long-term, it is believed the new tax could add £500m per year to the UK economy.
However, in September Google announced it would be passing on the increased payments to advertisers on its platform, adding more than £120 million to the annual costs for marketers.
In the House of Lords, Conservative peer Lord Leigh of Hurley said that the Amazon swerving its tax responsibilities was “absolutely outrageous”.
“It is clear that the UK Government is not taxing Amazon properly and is allowing it to avoid tax on its own sales through the marketplace,” Lord Leigh said.
Chancellor Rishi Sunak said in June that the coronavirus crisis had made tech giants “even more powerful and more profitable” and that they needed “to pay their fair share of tax”.
This comes after Amazon announced that its UK tax bill in 2019 was only £293 million on sales of £13.73 billion, a 3% rise in tax despite a 35% rise in profits over the year.
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The coronavirus lockdown has caused a huge increase in online sales as people are forced to stay at home instead of visiting the high-street, turning to e-commerce sites.
Amazon saw its profits double in 2020. In July, reports published by The Verge show that the firm’s income had risen to $5.2bn compared to $2.6bn during the same period in 2019.
In August, HM Treasury said that it was not planning to drop the DST on tech firms for fears it could hurt a trade deal with the US after Brexit.
A spokesman for Amazon said at the time: “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 so that rules would be consistent across countries and clearer and fairer for businesses.”