We price checked this year’s top toys and found that people concerned about the online giant’s tax issues can easily shun it
Amazon, Britain’s biggest online retailer, is undeniably cheap. But in the three years in which it amassed £7bn in UK sales, it paid no corporation tax on any of the profits from that income. So can consumers worried about tax avoidance – albeit entirely legal – shop elsewhere without having to face higher prices? Money went shopping and found it is surprisingly easy to enjoy an Amazon-free Christmas, yet still save money.
We tested prices on what are expected to be this year’s top-selling Christmas toys, from LeapPad computers to Lego. In almost all cases we found a retailer cheaper than Amazon, although we cannot vouch for each retailer’s tax position – some may engage in similar tax avoidance practices used by Amazon. We took prices on the same day – 5 November – to compare equally across the various retailers.
Smyths, a high street toy retailer with 61 shops and superstores in Britain and Ireland, was consistently cheaper than Amazon. For example, its Web Shooting Spider-Man toy is £19.49 online and in-store. At Amazon the lowest price on the day was £26.23.
But ethically minded shoppers then hit a conundrum: when it comes to tax, is shopping at Smyths any better than shopping at Amazon? The most recent UK accounts for Smyths Toys UK at Companies House show turnover of £97.4m in the nine months to the end of December 2011, an operating profit of £2.4m and corporation tax paid of £610,857. It may not be much, but it does appear to be paying more tax in Britain than its giant competitor.
It’s worth noting that Smyths’s parent group is based in Galway, Ireland, where the corporation tax rate is 12.5%. Ireland has come under fire from campaigners who say multinationals use its generous rate to minimise their tax bills elsewhere. For example, Apple is estimated to have avoided more than £550m in tax on more than £2bn of underlying profits in Britain by channelling business through Ireland, according to a Sunday Times analysis.
Help is on the way from accountant Richard Murphy of Tax Research, an anti-poverty campaigner and tax expert who is preparing a guide for consumers naming the shops where you can buy safe in the knowledge that tax is being paid, while shaming the tax avoiders.
A consumer boycott could work, believes Murphy, but it has to be against visible targets – which makes Amazon tough to tackle. “You won’t change the world by boycotting, but you can make a point and inflict reputational damage if the boycott is well targeted.”
He cites Starbucks as an example. The coffee chain has used legal tax-avoidance tactics to pay as little as possible, with a tax bill of just £8.6m on a reported £3bn in UK sales since 1998, and nothing in the past three years.
“You can walk into Starbucks, give the barista a note saying you would have bought a coffee here but for its tax practices, then cross the road and go to another chain or independent shop. The trouble with Amazon is that if you boycott it, no one will see that – and Amazon probably won’t notice.”
But Amazon, along with Google and Starbucks, will face a public grilling at the House of Commons public accounts committee on Monday, when MPs will quiz the companies on tax avoidance.
In the meantime, if you want to go to a well-known British company where you can safely assume it is paying its fair share of tax? A look at the accounts of John Lewis, the department store group, shows it paid £34.6m of tax on the £144.5m it made in profit in the first half of 2012. “We are a primarily UK-based group with a simple tax structure, and as a result pay a significant amount of tax to the UK government,” a John Lewis spokeswoman said.
But in most instances, John Lewis trailed Amazon on Christmas toy prices. It sells Furbys for £55 compared to £50 at Amazon, although on other items we tested the price differential was small. On one item, John Lewis was substantially cheaper than Amazon – it priced Lego Friends Olivia’s House at £54.99 compared to Amazon’s £70. Unfortunately the item was out of stock, which was probably down to the price differential. Shoppers are evidently hunting for bargains on the net, and when a popular item is priced significantly lower than competitors it soon sells out.
The chorus of concern over tax avoidance – and the loss of revenue to the Treasury – this week prompted George Osborne, the chancellor, to join forces with the German finance minister, Wolfgang Schäuble, in an international crackdown on tax avoidance by multinational companies.
The intervention came as the UK business secretary, Vince Cable, weighed into the Starbucks tax affair by berating corporate behemoths for “taking from the British economy and putting very little back”.
But neither Osborne nor Schäuble, meeting at the G20 finance ministers’ summit in Mexico, were eager to identify corporate culprits. Instead they called for “concerted international co-operation to strengthen international tax standards that at the minute may mean international companies can pay less tax than they would otherwise owe”.
Yet just as Osborne was announcing the crackdown, the head of HM Revenue & Customs, Lin Homer, was telling a House of Commons public accounts committee hearing that there was little it could do to stop multinationals such as Amazon, Google and Facebook from moving their profits abroad to avoid tax.
“All HMRC can do is apply the laws, and what I am acknowledging is that in an international setting, multinational businesses can choose to some extent where some parts of their business are based, and they can choose where some of their profits are based,” she said.
Murphy disagrees. He is proposing a form of unitary taxation of corporations, where tax is based on how many employees they have in a country, who they sell to, and where their physical assets are. Germany and France are behind the plan, and even Britain is coming round to the idea, he says, although it is strongly opposed by Ireland. One alternative for now is for shoppers to use local independent stores rather than the big chains, which also helps keeps money circulating in local communities. But at what price? Checking every independent store’s prices is out of the question, but Money did pop into Just Williams, which has three toy shops in Clapham, Herne Hill and East Dulwich, in south London.
Only two of the items among the predicted top sellers were available in the shop, but the prices were no higher than the major chains. “We check prices online and we’re no more expensive than the chains – and you don’t have to pay postage,” the manager said.
She recently had to visit a Toys R Us store to buy a Sylvanian Families centre she had promised to a customer but which had failed to arrive in time from their wholesalers. “They were selling it for £42.99, but we had priced it at £39.99,” she says. But she was relatively indifferent to Amazon undercutting other retailers, helped by its tax practices. “My son can go to Game for video games, but they can cost £42.99 there when they are £29.99 at Amazon. You can’t help but go for it.”
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