The government is promising reform as global companies like Amazon can pay less tax than traditional British retailers, ITV News Business Editor Joel Hills reports
Amazon’s workforce is expanding with the same velocity as its sales. The company is creating 10,000 jobs in the UK in 2021, on top of the 10,000 it created last year.
Amazon looked unstoppable even before coronavirus. In lockdown, it discovered an even higher gear as spending moved online.
When John Boumphrey, the head of Amazon’s UK business, joined the company 10 years ago, it had 2,500 employees in the UK. By end of this year, it will employ 55,000.
“The jobs we offer are great permanent jobs,” Boumphrey says. “We offer excellent pay, excellent benefits and great opportunities for employees to develop, inside Amazon and even away from the business”.
UK Amazon boss John Boumphrey says the company will offer permanent jobs with 'excellent pay, excellent benefits'
Amazon promises future employees private medical insurance, subsidised meals and hourly pay that is above the national minimum wage.
But working conditions at its warehouses - where most of the new roles will be based - continue to attract criticism from the unions.
Unite says that Amazon’s staff complain about bullying, mandatory overtime, surveillance and exhausting production targets.
Boumphrey insists that the vast majority of Amazon staff are happy. And he suggests that the problems that agency staff reported earlier this year, of not being paid and having shifts cancelled at the last minute, have been dealt with.
'We can confirm that there are no agency staff on zero-hour contracts'
“I’ve been country manager for Amazon in the UK for the past six months. I’ve had the opportunity to come a visit many of our sites. The feedback I get and what I see is overwhelmingly positive,” Boumphrey told me. “And we can confirm that there are no agency staff on zero hour contracts.”
Amazon is on a roll and it’s little wonder. Retail spending has been moving steadily online for years.
According to the Office for National Statistics, by February last year, 19% of sales were online. In lockdown, that accelerated to above 30%. Retailers believe this shift is permanent.
According to estimates by GlobalData, £4 in every £10 that is spent online is spent on Amazon’s website. No other retailer comes even close to that sort of market share.
Holes have appeared in Newcastle city centre that will be hard to fill. Traditional retailers are trying to keep up with the accelerated change in shopping habits and they complain that the tax system hands Amazon a huge competitive advantage.
Amazon has contributed £1.1 billion in tax in the UK last year, says boss
The company’s sales in the UK in 2020 surged by 51% to $26.6 billion (£19 billion). That’s double Marks and Spencer’s turnover.
But Amazon’s Business Rates bill (an estimated £71.5 million, according to Altus Group) was less than half of the £172 million M&S was charged because warehouse space is much less heavily taxed than shop space.
As a global business, Amazon is also able to exploit the rules on corporation tax to keep its liabilities down in way that many British retailers can’t.
In 2019, Amazon paid £6.3 million of corporation tax - which is levied on profits - in the UK. M&S paid £78.4 million.
Amazon argues it pays all of the tax it is required to and points out that it doesn’t write the rule. Both of these things are perfectly true but the tax system seems so obviously skewed in its favour.
Is Amazon responsible for dying high streets? Company's UK boss says no:
John Boumphrey lives in Oxfordshire. I asked him if, when he looks at the empty shops that are appearing on highs streets across the UK, there is a part of him that thinks “Amazon has done this?”
“No, there isn’t a part of me that thinks that,” Boumphrey replies. “I think the pandemic has been very difficult for businesses of all different sizes. A lot of these challenges were happening a long time ago. I think retail has increasingly been multi-channel and offering a great customer experience”.
Quite suddenly, shops are not the assets they once were. Worse still, for some retailers, they have become liabilities.
“This is 100% a good news story, a real win.” Business Secretary Kwasi Kwarteng is in Gateshead to celebrate Amazon’s recruitment drive.
“We are protecting the high street. We’ve committed £4.8 billion to the Levelling-Up Fund, we’ve committed £3.6 billion to the Towns Fund,” he told me.
Is Kwasi Kwarteng in favour of a global minimum corporation tax rate?
“We all know that the tax system we have now evolved at a different time, before there was even online shopping.”
The government is looking at reform of the tax system. A review of Business Rates is due to conclude in the autumn.
The issue is complicated. Retailers agree the current system is unfair but they don’t agree on how to reform it. If there was an easy solution, we would have heard about it by now.
In the United States, the Biden administration proposes a global minimum rate corporation tax to ensure companies pay tax in the countries where they make their profits but Kwasi Kwarteng is unenthusiastic.
“I think having individual sovereign countries deciding their tax rates is a very good idea,” he insisted.
No one is forced to order on Amazon. People do so because the company offers choice and convenience that didn’t previously exist. But the upheaval Amazon’s success is causing is being felt in communities across the UK.