From Bloomberg:
The carnage on the British high street from the likes of House of Fraser and Homebase naturally leads to calls for blood from internet retailing behemoth Amazon.com Inc. Enter Chancellor of the Exchequer Philip Hammond, who last week said he was strongly considering an “Amazon tax” to help retailers. Conservative Scottish lawmaker Ruth Davidson lent her support this week.
It’s a bad idea.
For a start, let’s just get one thing straight. Amazon didn’t kill the British high street.
The U.K. store chains that have collapsed this year did so because they didn’t have the right products at the right prices, invest enough in their businesses, or stay up to date with consumer trends. Associated British Foods’ Primark faces exactly the same pressures as everyone else, and doesn’t even sell via the internet. But it has prospered.
. . . .
Complaints about how such a big company as Amazon can pay such a low amount of tax in the U.K. have been around for a while. This focus on the high street is a different issue. What’s more, an internet shopping tax could well end up hurting the very bricks-and-mortar retailers the government wants to help.
More than 17 percent of sales were made online in 2017, according to the British Retail Consortium. Over half of those were with retailers that also have shops. So companies such as Next Plc, which has sizable online and offline businesses, face a double tax whammy.
. . . .
Consumers are in a fragile state. Anemic wage growth means their purchasing power is patchy. Retailers would likely pass along any increase in taxes, and that would probably just cause shoppers to draw in their purse strings.
. . . .
Many orders made via the internet are actually collected in stores. Any pressure on this business could create a headwind for retailers who depend on click and collect. The extra items that customers buy when they arrive at a shop to pick up their purchases is useful, and let’s not forget that cup of cappuccino they might buy at a Costa Coffee next door.
A tax on deliveries could sidestep damage to click and collect, and be better-focused on online retailers. But in trying to hurt Amazon, this could wind up dragging down the likes of ASOS and boohoo Group Plc, fast-growing British success stories in one of the rare bright spots of retail.
Link to the rest at Bloomberg
Perhaps he’s simplistic, but PG believes the purpose of taxes is to provide funds for (hopefully wise) government expenditures. Preferring one taxpaying interest group over another encourages rent-seeking which is grossly inefficient from an economic standpoint and invites corruption of all sorts.
Additionally, the simpler the tax regimen, the less-expensive tax calculation, payment, and enforcement are. A complex tax code (see, for example, the US Federal Tax Code – 74,608 pages long), by its very complexity encourages taxpayers to expend substantial efforts to find legal ways of reducing their taxes. Since the collective ingenuity of taxpayers substantially outweighs the collective ingenuity of tax code authors and enforcers, closing loopholes in a complex tax code is a never-ending task with each loophole-closing exercise ironically increasing the length and complexity of the tax code and potentially creating additional loopholes.
As an illustration, some tax attorneys base their entire careers on the expertise they develop with a single section of the tax code that may be 20-30 pages long. (There will be many more pages of regulations, IRS revenue rulings, Tax Court decisions, Federal District Court and Appellate Court decisions, subtle traps for the unwary, etc., etc.)
But PG bloviates and will stop now.
I met an attorney whose entire practice revolved around one line of the tax code. She was the go-to-expert on that one line. Her income was north of $500,000 a year.
I’m always happy to learn about attorneys who make a good living, but then I’m biased.
I should add that Ruth Davidson is not a ‘Scottish lawmaker’ however much she might wish she were. She’s the leader of the Conservatives at Holyrood. They are – in view of the mess that is Brexit, for which Scotland did not vote – not in power here and very likely to lose seats at the next Holyrood election. She seems to be far more popular in England than in Scotland. Any taxing of online business would probably not go down well in Scotland either, where many remote communities are heavily reliant on online purchases.
What isn’t mentioned here is the massive increase in business rates, which have recently been re-evaluated. These rates, plus the minimum wage, plus ever more restrictions on cars and parking, are damaging the high street as much as online shopping. But the government won’t reduce business rates until half the shops on the high street are closed, by which time it will be too late to revive them.
Conservatives are supposed to be the party of low taxation. In practice, they’re as bad as Labour.
Oh course it wasn’t mentioned, it didn’t fit the ‘Amazon = bad’ that they’re pushing. 😉
Additionally, the simpler the tax regimen, the less-expensive tax calculation, payment, and enforcement are.
I happened to be reading a WSJ article at work one day that made me laugh out loud. A reporter passing by asked what was so funny, and I told him about the article, a profile of rich families “onboarding” their in-laws from less wealthy backgrounds.
He shook his head. “See, it’s time to raise taxes on those rich people. They don’t know what to do with their money.”
My eyes may have had a mischievous gleam when I replied, “But the family in question is the H&R Block founders’ family. Complex tax codes are good for their bank accounts. You want to hit them in the pocketbook, then a flat tax is the way to go.”
I agree with PG: streamline the code.
“Since the collective ingenuity of taxpayers substantially outweighs the collective ingenuity of tax code authors and enforcers, closing loopholes in a complex tax code is a never-ending task with each loophole-closing exercise ironically increasing the length and complexity of the tax code and potentially creating additional loopholes.”
Priceless! 🙂
I agree with you all! Plus, there’s the law of unintended consequences.
Higher prices for Internet purchases and/or deliveries means a tax on the handicapped and elderly. While they may constitute only a small portion of Amazon (and other online) customers, they benefit significantly.
PG is NOT bloviating. He’s right.
In these days when they’re about to let a driverless car take little old ladies to their doctors’ appointments (I’m hoping), surely there must be some way of cleaning up a 74K page long mess.
You’re confusing the types of problem. The first problem is a technical one, the second is a social one. The latter is usually much more intractable than the former.
surely there must be some way of cleaning up a 74K page long mess.
There is. Repeal the whole thing and institute a consumption tax.
Ah, the smell of stupidity in the air …
What those demanding an ‘Amazon tax’ can never understand is that any legal taxation will have to affect companies other than Amazon – possibly hurting the very companies they’re trying to save even more than it ends up hurting Amazon.
Amazon can do what it does because of all the loopholes in the tax code to help businesses. Changing those laws will hit other than just Amazon …
I would go pop some corn, but this is just their every 3-6 month whine which will go nowhere … 😉
“Taxation is the primary tool of the social engineer.”
Or social war.
Dan
What, there’s a difference?
Uh, PG, the purpose of taxes is to coerce citizens into behaving the way their rulers want them to. Money to keep the government running they either print or borrow or both.
Don’t want people to smoke cigarettes?
Tax them.
Don’t want people to drink as much booze?
Tax liquor.
Want people to drive diesel cars instead of gasoline driven ones?
Tax gasoline.
Want people to go into hock for 30 years?
Tax break for mortgages.
Want people to buy insurance from for-profit businesses?
Tax those that don’t.
Want the “right people” to have more kids?
Tax credits per kid.
Don’t want people complaining about high state taxes?
Tax credit for state taxes.
Taxation is the primary tool of the social engineer.
After all, how else can they reward their friends and punish their enemies? Send out the military?
“Since the collective ingenuity of taxpayers substantially outweighs the collective ingenuity of tax code authors and enforcers…”
Whaaaa. The tax code authors can’t even grasp the Laffer Curve.
Dan