Amazon have announced that you will be paying the Digital Services Tax levied on Amazon by the UK Government. Your fees will rise by 2% from the 1st of September. Kindly, although the Digital Services Tax applies to revenue earned from the 1st of April 2020, Amazon won’t back date the passing the tax on to you and won’t ask you to cough up for the first five months.
The Digital Services Tax is levied on the revenues of search engines, social media services and online marketplaces which derive value from UK users. It’s a response to businesses which are domiciled overseas and operate paying less that what is perceived as their fair share of tax based on their revenue generated from their UK operations. The Government describes this as a misalignment between the place where profits are taxed and the place where value is created.
“Under the current international tax framework, the value businesses derive from user participation is not taken into account when allocating the profits of business between different countries. This measure will ensure the large multinational businesses in-scope make a fair contribution to supporting vital public services.”
– HM Revenue & Customs
Amazon are one of the large multi-national enterprises with revenue derived from the provision of an online marketplace to UK users and so are paying the new tax. However, whilst they’ll have to pay the tax on their own services and sales revenues in the UK, they have no intention of paying it on the revenues they generate from you so they’ll be stinging you in additional fees. Naturally this will almost certainly result in price increases and the consumer is ultimately the real loser.
This is of course the exact opposite of the UK government’s intentions. They intended a tax on large overseas businesses making billions in revenue and profits, not a tax on hard working small businesses struggling to make a living. Amazon passing the Digital Services Tax on to you as a merchant is exactly the reason that we believe the proposed 2% UK online sales tax is also a terrible idea… Amazon won’t pay it but you will. If the UK online sales tax comes in then, combined with the Digital Services Tax, your fees will see a total rise of 4% within a year.
“Earlier this spring, the UK government introduced a Digital Services Tax . While the legislation was being passed, and as we continued our discussions with the government to encourage them to take an approach that would not impact our selling partners, we absorbed this increase.
Now that the legislation has passed, we want to inform you that we will be increasing Referral fees, Fulfilment by Amazon (FBA) fees, monthly FBA storage fees and Multichannel Fulfilment (MCF) fees by 2% in the UK to reflect this additional cost. We will not apply the increased charges retroactively, but starting 1 September 2020, the fee types listed above will increase.”