Amazon business rate bill causing headlines for wrong reasons

Thanks to a series of Parliamentary questions Amazon has confirmed it pays business rates of £63.4m – almost £40m less than Next, despite netting more than double the UK sales of the FTSE retailer.

Cue howls of outrage across social media and the high streets of England.

In written evidence to a parliamentary inquiry, the online giant said its UK sales amounted to £8.77bn and it paid business rates on about 94 buildings as well as a number of locker sites in the UK – probably a lot more sites than most people had envisaged.

The figures indicate that business rates amount to less than 1% of Amazon’s sales compared to 2.5% for Next, 1.8% by Marks & Spencer and nearly 3.5% by Debenhams.

Last year Next paid £100m in business rates on sales of about £4bn; M&S paid £184m on sales of about £10bn and the John Lewis Partnership, which includes the chain of department stores and Waitrose, paid £174m on sales of nearly £12bn.

Struggling Debenhams paid considerably more than Amazon – £80m in business rates on  £2.3bn of sales last year.

As an illustration it shows another yawning gap between online and “bricks and mortar” retailers, but people are falling into the trap of comparing tax “apples with pears”.

Jeff Bezos has a business model that is superbly efficient globally, Amazon’s position and management of its business rates’ liabilities in the UK is just one example of that. People are forgetting that business rates are a property tax based on the rental value of premises – based on location, availability, competition etc – it is not a sales tax and so should not be used in any sane argument on the subject.

Amazon’s behemoth distribution warehouses out in the sticks may well also have attracted business rates relief at the outset to entice the investment in jobs, so again they can’t be compared to city centre shopping locations.

Comparing Amazon sales figures to Next’s or John Lewis’ is simply irrelevant in terms of business rate contributions, it just shows that Amazon has a different business model.

Amazon has defended the figures saying that in publishing its business rates’ bill it was showed it had paid “tens of millions of pounds more than estimates and more than is paid by many well-known high street retailers” – a fair point.

It added: “Online sales are still less than a fifth of total retail sales in the UK, and Amazon is a small percentage of that – perhaps a lot less than some people realise.”

The digital services tax that was touted in the last budget may help to add a little salve to those burning with the injustice of Amazon’s success… but meddling with the principles of rates will not level the playing field between online and high street retailers – only the consumer can do that in terms of where and how they choose to spend their money.

Business rate payments are an easy eye-catching figure to try and berate Amazon with, but it is too blunt a tool to use in any kind of informed argument on online versus the high street.