Tax demand as Amazon sales boom to £20BN during pandemic

The boom in online shopping during the coronavirus pandemic propelled Amazon’s UK sales to almost £20 billion, with about £1 of every £20 spent in Britain’s retail sector now going to the American retail powerhouse.

Amazon’s most recent accounts reveal that its UK sales rose by 51 per cent to $26.48 billion, or £19.12 billion, in 2020, from $17.52 billion in 2019 as pandemic restrictions helped to drive its sales higher. Amazon’s British sales are almost five times bigger than those of Next, one of the UK retail sector’s biggest names, and double annual sales at Marks & Spencer.

The disclosure will raise further scrutiny of how much tax Amazon pays in Britain and how the rise of online shopping is accelerating the demise of the high street. Next paid £134.6 million in UK taxes last year, while M&S paid £47 million. In 2019 Amazon paid £293 million in direct taxes in the UK. Meanwhile, its business rates liabilities are estimated by Altus to be £71.5 million, roughly 0.37 per cent of its turnover, compared with other bricks-and-mortar retailers that pay 2.3 per cent of their annual sales in rates.

Covid restrictions have meant that many households have shifted their spending online while stores were shut and people stayed at home to avoid infection from the virus. Official figures show that UK retail spending, including supermarkets, totalled £402.8 billion last year and that 27 per cent of spending was done online, which is equivalent to £112 billion.

This means that Amazon accounted for 17 per cent of all online transactions last year, despite the rapid growth of supermarket deliveries. Amazon has expanded its online grocery business through its partnerships with Morrisons, but its food business is significantly smaller than non-food, known for selling toys and electronic gadgets.

Natalie Berg, an analyst at NBK Retail, said: “Covid has jolted the industry like nothing before, it has upended the way people spend and for many retailers Covid has sounded the death- knell, but Amazon will come out even stronger. The disparity between the winners and losers is getting even bigger.”

The online retailer also has been accused of opting out of the digital services levy by passing a charge on to its small British marketplace sellers.

Amazon agreed to pay back £2 million of business rates relief claimed by its Whole Foods stores during the pandemic, after other supermarkets and essential retailers, which were allowed to stay open, handed back a total of £1.8 billion.

Retailers have been calling for a total overhaul of the business rates system. The system, based on the rateable value of physical property, raised £32 billion last year. Critics argue that outdated rateable values no longer reflect true property rent values, which have fallen dramatically during the pandemic and the shift to online shopping.

Topshop and Debenhams have been bought by Asos and Boohoo, the online-only retailers, underlining the radical reshaping of the retail landscape.

Patrick O’Brien, an analyst at Globaldata, said: “The question about how much tax Amazon pays and the rate system, which penalises physical retail, becomes all the more pertinent in the face of Amazon’s extraordinary growth.”

The Treasury is considering introducing an online sales tax to address the imbalance between fast-growing online retailers and the struggling high street.

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