Amazon … a closer look

As I am about to publish a blog on an alternative tax system I thought I should put the Amazon Tax situation down on paper.

The mechanics they have used are broadly categorised as Transfer Payments, and range from overstating invoice prices, to paying fees out of the country.

The negative impact on our economy is far greater than the amount of tax they enable Corporations to avoid. They also amount to a withdrawal of resources from our economy. In the normal course of events a Company would make profits which eventually emerge as cash and portion of that cash will be paid out as dividends thereby flowing back to the consumer who in turn is able to spend or invest it. Keeping the circle going.

Let us look at Amazon for a minute. Not from the perspective of the tax they have avoided but from their actual effect on the economy.

In structuring their affairs to minimise their tax they are virtually moving all their profits off shore into a tax haven.
As they do not have to consider tax as a cost they already are at an unfair advantage against the local book seller, even if their bulk warehouse system is not more efficient.

This unfair advantage has contributed to the closing of hundreds of our book shops on the high street, and those that have not been closed are in a profits squeeze. Yes they may have created employment in specific areas with large warehouses, but the taxpayer has had to subsidise that … they have cost many more jobs lost in bookshops around the country as well as in the supply chain that already existed!

Worse they have taken out of our economy the profits from the sale of those books! Those profits are never again available to recirculate in the economy and help create wealth and growth. Worse if we look on them as a contributor to the economy, and then look at their impact on Gross National Product … they have contributed nothing!

Gross National Product is      
the Sum of outputs  – the sum of inputs
This is actually the sum of "values added" by all the businesses.
We use a short cut to calculate the figure based on consumers consumption expenditure, but this should always equal the sum of values added by businesses.

It should be easy to see that when profits are transferred out of the country we should count it as an input therefore the net value added by Amazon to the UK is exactly zero!


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