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Amazon Won’t Have To Pay U.K. Digital Tax That Will Impact Third-Party Sellers

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This article is more than 3 years old.
Updated Oct 14, 2020, 06:53am EDT

Topline

Amazon will be allowed to skirt the U.K.’s new digital services tax on goods it directly sells to consumers but third-party businesses selling their products on the e-commerce platform will have to pay the levy.

Key Facts

The new tax, aimed at tech giants, will not be charged on sales— as this would impact other online retailers— but on the service fees that companies such as Amazon and Google charge third parties, the Times reported.

Amazon and Google have stated that they will pass the 2% tax on revenues made in the U.K. to sellers and advertisers who use their platforms.

With the 2% levy impacting only third-party sellers, Amazon may end up having a pricing advantage on products it sells directly to consumers.

Big Number

£14.46 million ($18.6 million). That’s the total amount Amazon paid in corporation taxes in the U.K. last year, a 3% increase over the previous year, the Guardian reported. The company’s revenues within the country, however, grew by more than 25% to £13.7 billion ($17.7 billion) last year. The U.K.’s leaders have claimed that the digital tax announced in April will make “global giants with profitable businesses in the UK pay their fair share towards supporting our public services.”

Key Background

In June, the U.K. and other European nations said that they would press on with plans to implement a digital tax unilaterally after the U.S. pulled out of negotiations with the OECD on an internationally agreed tax. The U.S. said it was unable to agree even on interim changes to global taxation laws that would mostly impact U.S. tech companies, but threatened retaliatory measures if the European countries pressed on unilaterally. European nations have long been championing new taxes on the likes of Apple, Google, Facebook and Amazon, arguing that they generate large profits from the region’s market while paying minimal taxes.

Tangent

Amazon’s dual role as both an online seller and a marketplace for third-party businesses has led to regulatory concerns. The company has been accused of influencing search results and harvesting third-party sellers’ data to compete with them on its site. In August, Canada’s Competition Bureau and Germany’s Federal Cartel Office opened investigations into Amazon’s conduct with third-party sellers on its platform. In June the Wall Street Journal reported that the European Union plans to initiate antitrust charges against Amazon due to its treatment of third-party sellers. Prior to that in April, U.S. lawmakers asked the company to clarify if it had lied to Congress about the methods it uses against its competitors on its platform, accusing the company of using data generated by third-party sellers to develop competing products. In 2019, Amazon’s Associate General Counsel Nathan Sutton testified before the House Judiciary’s subcommittee on antitrust stating that Amazon does not “use individual seller data to directly compete with them.”

Further Reading

Amazon will escape landmark digital tax (The Times)

Amazon to escape UK digital services tax that will hit smaller traders (Guardian)

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