Amazon’s decision to launch a branch of its business in the UK so that it will pay more tax here is a canny move to keep customers onside.
Almost three years since Amazon was so publicly hauled across the coals at a Parliamentary Public Accounts Committee for its taxation policy, it will start paying corporation tax in the UK.
Accounts Committee for its taxation policy, it will start paying corporation tax in the UK.
The move follows a change in the way it books revenues from retail sales and the establishment of a London branch of its main retail company.
That parliamentary committee was a low point for Amazon, which was joined in the dock by the likes of Google and Starbucks and branded “immoral”, “manipulative” and “pathetic”.
“Amazon has a reputation for staying one step ahead of consumers”
The public pressure for reform has in part led to Chancellor George Osborne introducing in April a law aimed at recouping taxation from “diverted” profits. The measure applied a 25% levy to corporations judged to be avoiding tax by diverting earnings through other countries.
To some degree this may have prompted Amazon’s change in tax policy, alongside pressure from a number of European regulators. But what is apparent is that public distaste for its hitherto stance on tax has done little to dampen consumer enthusiasm for its services.
Other more embattled retailers such as Tesco must look on with envy, wondering quite what the resultant storm would have looked like had they found themselves in a similar situation in the past 12 months.
Yet one need only look back to Tesco’s own march to dominance in the 1990s, when fears of a Tescopoly attracted years of scrutiny in the media, to see comparisons. Amazon’s customers continue to be wooed by the etailer’s ruthless focus on delighting shoppers and turn a blind eye to any moral discrepancies. Like Tesco two decades ago, love, for now, is blind.
However, as Tesco’s recent decline has illustrated, the ability to sustain enduring appeal among shoppers is not indefinite.
Amazon has a reputation for staying one step ahead of consumers and this latest change in tack may be another example of it remaining ahead of customer sentiment, and refusing to fall into the same hubristic trap that befell its more traditional retail rival.
Is the glass half full for retailers?
Retailers are reportedly more optimistic than at any time in the last three decades, according to the CBI’s latest retail survey.
The news follows data from Asda’s monthly income tracker that showed Britons had an extra £17 a week in their pockets compared with this time last year and figures from the Office of National Statistics indicating the fastest pace of growth in retail sales volumes since November.
However, at a time of deflation and hyper competition and the ongoing rhetoric from retailers about how hard they are fighting for every pound, one has to wonder quite how well the CBI survey reflects reality.