Could ‘Amazon tax’ save struggling high street retailers?

Labour is considering backing an “Amazon tax” on digital retailers that could level the playing field for struggling high street shops, the shadow business secretary has said.

In an interview with The Independent, Rebecca Long-Bailey said the party could throw its weight behind the idea in a bid to ease the pressure on brick-and-mortar businesses.

Disappointing Christmas sales figures rounded off a dire 12 months for Britain’s embattled high street sector. Around 88,000 retail jobs were lost in the first nine months of last year, with big households names such as Maplin, Poundworld, Toys R Us, House of Fraser, Mothercare and New Look either going bust or announcing store closures.

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Landlords are set for “a fresh wave of pain”, The Sunday Times says, “after more than 20 struggling high street chains instructed Deloitte to assess whether they are eligible for debt restructuring in the past two months alone”.

The paper reports the accountancy giant “is understood to be considering whether the chains, mainly fashion and homeware retailers, can use a company voluntary arrangement (CVA) to shut shops. CVAs allow distressed businesses to walk away from lease liabilities to keep trading, but they have been criticised for leaving landlords shouldering a disproportionate burden.”

“I think to lose the high street would be very, very damaging for Britain and I think people are very angry about what they are seeing,” Long-Bailey said.

While online sellers such as Amazon are able to undercut high street businesses, they also pay less tax than traditional retailers as they trade from warehouses rather than physical stores.

“Amazon’s ability to pay 20 times less tax than other similar sized organisations, yet apparently still operate within the law, clearly illustrates the absurd situation with the current tax legislation,” says business consultant Susan Andrews of Kis Finance.

“Whilst the market has shifted towards omnichannel retailers, the UK’s tax regime in relation to the retail sector remains antiquated; high street stores are subject to business rates that effectively operate as a property tax, with online retailers currently able to avoid these costs.”

The Chancellor Philip Hammond has indicated he could consider tax changes for online retailers. He has also faced pressure to soften business rates which have been criticised as not fit for purpose in the face of online competition.

“In order to successfully tax companies such as Amazon, the Chancellor would need international cooperation,” says Essential Retail. “This means that there will be no gaps and reduces the risk of businesses being taxed twice.”

The Independent says “another proposal would force councils to set up an empty property register so they can engage with landlords, to get the buildings back into use”, although the MP for Salford and Eccles admitted it was not a “silver bullet”.