The under-taxation of tech companies and online retailers

As a general rule, I don’t believe in high taxes. Partly because I believe they make economies less vibrant by discouraging investment and reducing disposable income. But also because of the principle that people, for the most part, have a right to keep what they have earned. Governments should only take what is necessary to keep people safe. In a developed country, a social security system to protect against poverty is also desirable. Historically speaking, governments have been the worst oppressors of their people, which is why America’s founders were sceptical of them having too much money and power.

However, taxes should also be equitable, and shouldn’t discriminate on the basis of how people do business. This means they must keep up with technological developments. Today, this means that traditional retailers should be taxed at the same rate as online retailers. But in the US and the UK, online retailers are privileged, however inadvertently.

In the UK, businesses have to pay business rates, which are levied based on the value of the property the business is using. In theory, this should be a progressive tax, hitting large corporations with sizeable operations. The reality is rather different. Far from alleviating small businesses, it actually penalises them- particularly if they are based in London, where property prices have rapidly increased in recent years. In contrast, online retailers like Amazon pay relatively little business rates, because they use large warehouses in rural areas where land is cheaper. To rectify this, I believe business rates should be abolished, and Britain’s corporation tax (relatively low by international standards) should be raised to compensate.

The US also practises discrimination in favour of online retailers. Each state (with a few exceptions) levies a sales tax. If you buy something from a traditional store, you will have to pay that tax. But if you buy something online, provided the store is based in a different state to where you live, you won’t have to pay sales tax, making online shopping considerably cheaper. To make matters worse, many online retailers avoid paying sales tax altogether by making the online store a different legal entity to the physical store that will deliver your purchase. On top of that, these online retailers are far better at avoiding taxation generally by hiring expensive tax lawyers and ruthlessly exploiting loopholes. The overall result is a tax structure that punishes small shops and rewards the tech giants.

It’s well known that the major tech companies do not pay what they ought to in tax by moving money offshore. The only solution is for countries to band together and make these companies pay what they owe in a system of supranational tax enforcement. In Europe, the European Commission is already trying to do this, though the task remains a formidable one. Other continents should follow suit.

It was absolutely shocking to read Conservative MEP and avid Brexiteer Daniel Hannan’s defence of mass tax avoidance in the Telegraph. His argument was that everyone tries to reduce their taxes, only the tech companies and online retailers do so on a larger scale. This argument is complete nonsense, because large corporations can reduce their taxes through means that aren’t available to ordinary businesses. A truly fair system would ensure that everyone’s ability to reduce their taxes is the same. It was also anger at elites and large corporations that contributed to Britain voting to leave the EU. If a post-Brexit government were to turn a blind eye to tax avoidance and unfair business rates, then the likes of Hannan will find themselves hated by the very Leave voters they claim they represent.


  1. I have never shared the intense dislike of taxation that is evident, mainly among people with right-wing views. One might criticise certain taxes as being badly designed or unfair on certain citizens, but in general I would say that taxation is the price we pay for living in a civilised country. It provides benefits one couldn’t provide for oneself efficiently, e.g national defence, education, policing, hospitals and doctors ( in the UK anyway), town planning, food safety, and on and on. In my particular case taxation gave me the opportunity to get a degree as well. I don’t like some of what any government does, but I am grateful for the fact that citizens join together and pool money for the general benefit of everyone.

    You seldom hear this – all you get is endless moaning and devious cheating in offshore banks etc. For some people paying any tax at all is tantamount to public theft. I have nothing but contempt for little-minded, selfish people like this.

  2. In the US, the tide has turned on the taxing of online sales. Amazon, for example, has finally accepted the requirement to impose the same sales tax as the retail shops. It’s the small businesses that safely ignore this legal mandate which is a good thing.

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