Is tax avoidance killing off the high street?

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As more and more high street stores close their doors for good, market analysts have been arguing over what can be done to support small-business owners in this turbulent economic climate. But with massive, global companies such as Amazon and Starbucks aggressively manipulating European tax laws to skew the odds in their favour, how can ‘the little guy’ really expect to compete?

This is a tough time for high street retailers. Caught between weakened demand and the impact of technological change, some have found that their business model just isn’t sustainable in this new age of economic austerity.

Others have found that despite offering a strong, recession-proof model, they have been left simply unable to compete with large, multi-national companies who are often able to offer the same products but at a massively reduced price.

This comes as standard with big companies – buying in bulk means discounted prices – but over the past year, a new scandal has come to light and added further context to the cheap deals which consumers often find so attractive; tax avoidance.

Research from the Tax Justice Network in 2011 found that the UK loses nearly £70 billion annually through tax avoidance schemes (a figure that represents about 56% of the country’s total healthcare spend). In particular, Amazon, the online book retailer, failed to pay any corporation tax at all in 2012 despite making UK sales of £2.9 billion.

This led to Frances and Keith Smith, two independent bookshop owners from Coventry, setting up an online petition, demanding that Amazon pay its fair share. It has since received more than 171,000 signatures. They say that if we all have to pay our taxes, Amazon should too.

“What they’re doing isn’t strictly illegal but it is definitely immoral,” Mrs Smith said. “Amazon are trading in this country, they are taking money from customers in this country and they are relying on the fact that you can trade here with certain protections.

“When the Public Accounts Committee looked into this, I think they were absolutely astounded that these people didn’t know how much profit they were generating here.  They’re using our roads to distribute the goods and then they’re saying that they’re not making any profit in this country so they’re not going to put anything back in. I think that’s where the issue of morality lies.

“I pay my corporation tax and so do a lot of big businesses. It all goes towards paying for the basic infrastructure. That money is used to pay for the roads and to pay for people’s health services so they can go to work. All these things have to be paid for and you have to put money into the pot if you want to be able to take something back out. If you’re trading and just taking things out without putting anything back in, then that’s just wrong.”

Mr and Mrs Smith were inspired to post the petition online when they realised the impact that tax avoidance is having on businesses like their own all over the country.

“I think everyone is in a difficult trading situation at the moment,” Mrs Smith said. “Retail is really struggling right now. If you look at high streets up and down the country, there are many that are looking really sad and really desolate and a lot of it is because people just can’t compete with these big businesses. How can they compete if they’re in an unfair situation to start with? It makes it even harder.

“If you look at British high streets, they’re being squeezed left, right and centre – squeezed for all sorts of reasons – but big online retailers like Amazon are taking an unfair advantage. I think the high street is important and I think retail is a very important part of our economy – and it’s an exciting part. Shopping is supposed to be one of the things that people enjoy doing the most. If the high street continues to crumble, people won’t be able to enjoy that benefit any more.

“Beyond that though, it’s not just consumers who’ll be at a disadvantage; it’s authors, it’s people who write music, it’s the people who design clothes and it’s anyone who makes things professionally. All these people are being pushed further and further by companies like Amazon taking that unfair advantage.”

Certainly, the statistics would seem to support Mrs Smith’s observations. According to research by PricewaterhouseCoopers and the Local Data Company from 2012, retail chains are closing at an average of 32 shops in Britain every day.

This is without even looking at smaller businesses with just a single premises. Figures from the Bookseller’s Association have shown that the number of independent booksellers in the UK dropped to 1,094 in 2011, falling from 1,159 in 2010 and 1,289 in 2009. This, it would seem, is a sign of the times.

There are of course many reasons why the high street is struggling at the moment. What’s clear though is that if we want to keep our individual, independent businesses alive, we must act now and vote with our wallets. It’s not too late to save the high street.

 

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