John Lewis: solve Amazon tax 'problem' or we'll go bust

Nov 15, 2012

John Lewis boss says his company will be out-traded by multinationals like Amazon because they pay less tax

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JOHN LEWIS has said the Amazon problem - whereby foreign multinationals pay little or no corporation tax to the UK Exchequer - must be addressed urgently or retailers might go out of business and the UK will lose tax-paying companies.

Andy Street, managing director of John Lewis, told Sky News: "If you actually improve your business by investing... you have got less money to invest if you are giving 27 per cent of your profits to the Exchequer than, clearly, if you are domiciled in a tax haven and you've got much more.'

Asked by Sky's Jeff Randall about what he termed the "Amazon problem", Street said: "They [Amazon] will out-invest and ultimately out-trade us and that means there will not be a tax base in the UK."

Street's comments follow the appearance of executives from Amazon, Starbucks and Google before the House of Commons Public Accounts Committee earlier this week.

Committee chairman Margaret Hodge accused the companies of being "immoral" for taking money out of the country and giving nothing back.
Amazon's Brussels-based director of public policy Andrew Cecil was singled out for being "totally evasive" and "pathetic" and Hodge said she would "order" Amazon to send someone more serious to answer her questions.

Street is the first leader of a British business to lend his voice to calls for an investigation into the way foreign firms are taxed here.

Former Labour City minister Lord Myners made a similar point to Street's earlier this week when he told BBC Radio 4's Today programme that it is "unfair competition" that Caffe Nero and Costa do pay tax in this country while Starbucks does not.

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The correct fix is to reduce the taxes that companies like John Lewis pays on their profits. It is very hard to force foreign companies to pay profits tax to the UK tax collectors. Under EU laws, a German company, for example, can sell goods despatched into the UK from Germany and collect VAT for the Bundesministerium fur Finance. This would make the UK Government massively worse off. No income tax or NI taxes on warehouse workers, no import duty, no Uniform Business Rates, no taxes on the supply chain and no VAT either. This would be far worse than than losing 27% of profits when Amazon makes quite modest profits overall.

With a highly competitive UK tax on profits, many multinationals would chose to invest far more in the UK and British investors would get a greater return on their UK investments. This would directly lead to more jobs and thus taxes and NI on those jobs and lower costs of benefits for those workers able to escape the dole. It is very likely, that eliminating corporation tax, could result in a net higher tax take within three years and transform the UK economy for the better within a decade.

The answer is to charge these foreign companies (that play silly buggers with their accounting tricks) on their locally based British turnover and not on their profits. We can prevent them operating here if we want. Just as we need to get together with other countries all over the world to stop the rich hiding their wealth in secret tax havens. Paul Clieu is totally wrong in what he says. The result would be no taxation of profit-making institutions at all. Great for the Neo-Cons of course who think everybody should stand on their own feet - always much easier if you are made of money. Avoiding that sort of anti-social structure is exactly what the last 200 years' Euro- and Brit-history has been largely about. Public money can be well spent on mutually beneficial investments and ongoing public services. What's wrong with Obama-care is precisely that it is not more like the NHS. But of course we need efficient and effective public services. The problem with going for the model Clieu wants is that it will enhance the lowest common denominator effect in pay-scales: everybody ends up as badly off as then poorest peasant somewhere in what used to be called the third world who is just as good at doing a task as Jo Public in the UK. Free trade - fine. Fair trade - fine. But negotiating all these national versus international bumps is not going to be easy.