Amazon vs Rishi Sunak – Tax breaks, tax raids & ‘till-less’ shops in London

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Amazon vs Rishi Sunak – Tax breaks, tax raids & ‘till-less’ shops in London

The Coronavirus pandemic has hit traditional high street stores particularly hard, but it’s had the opposite effect on tech giants like Amazon, Google and Facebook.

Amazon UK sales increased by 51 per cent in 2020 to £19 billion as shoppers shifted to online delivery for their essentials. But the company pays little corporation tax – just £14.5 million in 2019.

This has prompted Chancellor Rishi Sunak to declare war on Amazon, and other eCommerce stores that have profited from the pandemic.

“There needs to be a way of ensuring big tech corporates pay fair taxes rather than pass them on. As with all policy changes, both the digital services tax and a tax that targets excessive profits must be considered holistically to mitigate adverse impacts on scaling businesses”

– Rishi Sunak, The Standard

 

With eCommerce stores excelling in the pandemic and traditional high street stores struggling to keep their head above water, how will the broken economy survive? Will eCommerce ignite economic recovery post-COVID? And what part will till-less stores play as the story pans out?

 

The Amazon situation

COVID-19 has had a devastating impact on traditional stores and independent businesses such as small online retailers.

In order to create a level playing field for all retailers, Chancellor Rishi Sunak is considering introducing two new tax rate regulations, as well as 30 other planned tax changes that are to be revealed this month.

• The first is an online sales tax. The new tax will target online retailers that have seen a spike in profits over the course of the pandemic.

• The second is an “excessive profits” tax who have seen profits surge as a result of COVID-19.

 

Rishi Sunak, the Chancellor is rumoured to be working closely with US Treasury chief Janet Yellen on new “Amazon Tax”. The move will be an agenda item in the G7 summit in Cornwall in June 2021.

Sunak hopes to have a deal by the summer which will force multinational “click” firms to hand over fair tax on their earnings.

Tax is an expense that Amazon, like many global firms have sophisticated methods to minimize. Many multinational corporations often have entire off-shore operations dedicated to the practice of minimizing their taxes, which makes pinning down their full revenue even more difficult.

Sunak’s first attempt to target Amazon was a flop after former US president Donald Trump fiercely rejected the proposal. With Joe Biden’s arrival in the White House, new hopes have been raised that action can be agreed to create a level playing field for all retailers.

 

‘Till-less’ stores in London – the way of the future?

Tax breaks, tax raids & ‘till-less’ shops in London-high-street

In the first quarter of 2020, Amazon started to offer its till-less technology to high street stores, just two years after Amazon launched its own till-less store, Go Grocery chain. The first till-less store has also opened up in Ealing, West London this month, with customers reporting a seamless shopping experience.

The Just Walk Out system has been adapted for other retailers, thus allowing high street shoppers to simply register a payment card on entry, and that card will then get automatically billed as they leave.

 

What does this mean for the high street?

Realistically, smaller retailers are a long way from moving to a till-less system en masse. Instead, with Amazon introducing its pioneering technology in the high street, they’re stealing even more market share. The possibility of a level playing field for smaller retailers and brands begins to feel even more like a pipe dream.

 

The Spring Budget 2021 and plans for recovery

Chancellor Rishi Sunak is attempting to identify other ways that might fuel economic growth.

The Chancellor announced in the Spring budget 2021 that the Coronavirus Job Retention Scheme, more commonly known as the ‘furlough’ scheme, has been extended until 30 September 2021.

The furlough scheme takes pressure off smaller stores who might not be able to pay the full wage of employees but still want to keep their staff.

More importantly, though, Sunak announced that there would also be the introduction of a business rates relief scheme.

The scheme aims to provide relief for traditional bricks and mortar stores during the COVID-19 pandemic by freezing 100% of business rate bills for the first three months of 2021.

This will offer a vital lifeline for businesses who are still having to close, as the national lockdown continues and the public waits for the NHS to finish vaccinating priority groups.

Looking beyond the UK government’s attempts to refuel the UK economy, could there be other ways that get the country back on track? And are Chancellor Rishi Sunak’s efforts enough to create a level playing field for all retailers?

 

eCommerce to fuel economic recovery

The coronavirus pandemic has turned the economy of the United Kingdom upside down.

The Chancellor’s 2021/22 spring budget aims to fuel the recovery, partly through schemes introduced to provide financial aid for traditional high street retailers.

But with the tide of eCommerce rising so high, growth in this area dwarfs the recovery of the high street.

 

eCommerce start-up growth

Amazon vs Rishi Sunak- ecommerce warehouseThe pandemic has accelerated the move to online shopping while also triggering a shift in the types and number of products that are in demand.

The rising demand has benefited eCommerce marketplaces and the trend is set to continue through the recovery period.

But for marketplaces to grow, they need a ready supply of merchants on their platform.

There is a need for early-stage merchants to seek advice and support, and in particular to set up cash flow forecasts, to understand the impact of working capital on their ability to buy stock and respond to market demand.

Planning ahead to pay tax bills is part of this, and the Chancellor’s initiatives in the Spring Budget will help. But the taxes themselves are only one factor for merchants, especially in the early days. It’s more about planning, cash forecasting, ensuring they have sufficient working capital – and understanding business finance.

 

Capital that benefits the marketplace and the merchant

A Woodsford TradeBridge facility can benefit both the marketplace and the merchants.

Marketplaces need to focus on securing more sticky supplier relationships as they grow, so that the merchants are loyal and have the capability to scale as needed.

A Woodsford TradeBridge facility can benefit both the marketplace and the merchants.

Marketplaces need to focus on securing more sticky supplier relationships as they grow, so that the merchants are loyal and have the capability to scale as needed.

Additionally, they need to incentivise merchants to do two key things:

1. Expand their product offering and

2. Utilise the marketplace’s fulfilment service

 

Both initiatives require merchants to continue to invest in their business and to commit capital to innovate and finance stock in the marketplaces warehouse.

It’s not just up to marketplaces to facilitate a strong relationship with their suppliers though.

Merchants must also nurture that partnership.

 

Merchant growth leads to marketplace growth

Merchant growth leads to marketplace growthGrowing merchants need working capital in order to keep investing in their business, so that they can continue to meet rising demands.

Sometimes these demands aren’t met, because merchants run out of cash during peak seasonal periods and miss out on potential sales.

The right type of merchant finance facility allows merchants can solve these bottlenecks and continue to grow without cash flow concerns.

They’ll have the working capital they need to secure stock, create a more diverse portfolio of products, and to improve delivery time to customers.

 

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