Budget. Too little much too late?

It was one of the more welcoming features of the Budget, a Digital Services Tax to make the likes of Amazon, Google & Facebook pay their fair share.

The Treasury says it will apply to search engines, online marketplaces and social media firms who have global revenues of more than £500 million. But is it too little much too late?

In a recent Daily Mirror budget related article Mr Hammond had said: “The best way to tax international companies is through international agreement. But if we cannot reach agreement, the UK will go it alone with a Digital Services Tax.”

And Lord Sugar said in separate Daily Mirror interview: “One of things I would like to do is invoke, and I don’t know how you would go about doing this, a tax on online purchases on top of VAT and things like that. But then again, you are going to affect the small-time trader like us.”

Lord Sugar continued: “Amazon, for example, worldwide is killing every single business. Every single business”.

The chancellor seems to have listened to leading industry figures like Lord Sugar. As in the budget he said social media firms & search engines will pay the 2% tax on the advertising revenue earned from UK users. And when it comes to online marketplaces, the aim is not to put a tax on the payment from the consumer but on the “platform fee”, the commission paid by the merchants using the market.

But organisations will only pay the tax if they have global revenues of at least £500m, safe guarding small UK organisations. They have to be profitable too. And the first £25m of UK revenues will be tax free.

The BBC reported the Office for Budget Responsibility says around 30 companies could end up being affected. And detailed who might fit into each category:

  • Search engines: It’s hard to see any business other than Google and Microsoft’s Bing qualifying for the tax
  • Social Media firms: Facebook certainly fits the bill, and don’t forget it also owns Instagram which is now generating lots of advertising revenue. But what about the UK’s other favourite social hangouts Twitter and Snapchat? They aren’t making profits – until they do they’re exempt.
  • Online Marketplaces: Here it gets a lot more complex. Ebay certainly qualifies but tax experts are divided about Amazon, It won’t pay anything on revenues earned from direct sales to shoppers but what about the commission from merchants using the Amazon Marketplace as a platform to sell their wares?
  • Food Delivery: Then there is speculation about a couple of UK firms in the food delivery business, Deliveroo and Just Eat. Their business model – earning commission from restaurants dependent on their platform – appears to qualify but Deliveroo’s revenues are below the threshold and neither company is making a profit. But that could change by 2020 when the tax comes in.

For now it seems that only American tech firms will be hit by the budget announcement. As very few British firms are big enough. Yes we need to collect our fair share of tax from Google & Facebook as they have been clearly playing the system for years.

But for me the big one is Amazon as it’s monopolising the retail sector, and having a major impact on not just our high streets but on UK online retailers too.

I’ve written a number of articles around this subject. One asked the question ‘is your product Amazon repellent?‘. Which explains why you should design products that Amazon will find very difficult to replicate and sell on their marketplace. And that we had developed a number of office solutions in this way.

And another recent article (are you willing to save your high-street) suggested, if we all stopped buying everything from Amazon (even if it cost a little more) and spread our purchases across a number of small organisations (online & high street). Just maybe our high streets might bounce back. And it will stop Amazon from decimating our online independent retailers too.

And you know what? I’ve even started 1 person crusade to never buy off Amazon again. Yes, it might seem a bit radical. But I’m passionate about UK organisations & I want to see our high streets vibrant again. But it’s going to take more than me to bring change. It needs a shopping habit revolution. Are you willing to do it too?

2018-11-01T11:01:50+00:00Categories: Uncategorized|