John Lewis boss: unfair tax means we can't compete with the likes of Amazon

The managing director of John Lewis has hit out at corporation tax rules that, he says, make it impossible to compete on a level playing field.

Companies based in the UK pay more tax than those headquartered overseas, despite operating in the same market. And, says Andy Street, this gives the multinationals an unfair advantage.

"Two companies making the same profit, one of them pays corporation tax at the UK rate, one does not because it claims to be headquartered somewhere else – that is not fair," he told ITV News.

"The government is trying to address that but as yet we've not actually seen that [reform] really bite. It matters because the company paying corporation tax has, of course, less to invest in its future and in this time when retail is changing so fast, that is a critical differentiator."

When asked whether he thought there was still an 'Amazon tax problem', he replied: "I think there still is."

In the long run, he says, British companies will be at a serious disadvantage against foreign competitors.
%VIRTUAL-ArticleSidebar-tax%
While every sale made by John Lewis and subsidiary Waitrose in the UK is recorded here for tax purposes, multinationals such as Amazon are able to avoid this. They do it by recording UK sales in another country with lower corporation tax, such as the Netherlands or Luxembourg.

In the last financial year, for example, Amazon actually sold more than £5.3 billion worth of goods in the UK. However, virtually all of this was booked as having been sold by the Luxembourg company, giving the company's Amazon.co.uk subsidiary an official profit of just £34 million.

As a result, Amazon was able to get away with paying just £11.9 million in corporation tax in the UK.

By contrast, John Lewis booked all £9.7 billion of its sales in the UK in 2015. It recorded a profit of £194.4 million, on which it paid £51 million in corporation tax - four times as much as Amazon.

Growing opposition to the current situation has prompted the government to introduce a Diverted Profits tax, under which companies deemed to have artificially diverted profits abroad will be required to pay a 25% levy.

The Treasury expects the levy to claw back £1.4 billion over the next five years - as long as companies don't manage to restructure and avoid it.

Meanwhile, the EU is currently looking into Amazon's tax arrangements, investigating whether they amount to illegal state aid from the Luxembourg government.

X