John Lewis boss concerned ‘Amazon tax problem’ is creating an unfair fight

Twelfth night has come and gone, the Chistmas lights are out but John Lewis has reported a set of sales figures that sparkled.

The department store believes it has outperformed its rivals, once again, online in particular. And yet it’s managing director told me the fight with one rival – Amazon – still isn’t a fair one

Andy Street told me: “If you think 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.

“The Government is trying to address that but as yet we’ve not actually seen that (reform) really, 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.”

So I asked him: “Just to be clear then, three years ago you said there is an ‘Amazon tax problem’. You think there still is do you?”

“I think there still is,” said Mr Street. “This is not just about John Lewis, let’s be absolutely clear, this is about those UK companies paying corporation tax on the profit made on the UK against companies that make profit here but do not declare it and therefore do not pay tax.

“Over time this is likely to mean British companies, paying British taxes are disadvantaged.”

In its last financial year Amazon booked more than £5.3 billion of British online sales through its operation in Luxembourg. MeanwhileAmazon.co.uk, a British subsidiary, posted a modest profit of £34 million. And paid £11.9 million to the government in Corporation Tax.

By comparison, every sale made at John Lewis and Waitrose online and off was booked in Britain. The partnership made a profit of £350m and paid £51m in corporation tax – four times more than Amazon

Amazon says it pays all applicable taxes in the countries in which it operates and, since May, has stopped channeling British sales abroad. Its tax arrangements in Luxembourg are currently under investigation by the EU to ensure they don’t amount to state aid.

The British government has acted to stamp out tax avoidance by multi-nationals, introducing a Diverted Profits tax, drafting new laws to enforce greater transparency and pushing for international cooperation. The Treasury rejects Mr Street’s view that reform has yet to prove effective.

The tax expert, Professor Richard Murphy, credits the government for taking the lead on preventing profits being shifted overseas but he too is sceptical.

“None of the data on country-by-country reporting will be on public record so that anyone can scrutinise it,” he said. “And, vitally, whilst UK companies do have to supply this data, now companies based elsewhere, like Amazon, Google and Apple, have to supply their data in the first instance to the US tax authorities, and not only is the law requiring them to do that not yet passed in that country, but the Republicans are very strongly opposing it.”

There has been change, but John Lewis believes the playing field still isn’t level.

As it stands global companies can use the tax system to their advantage in a way British companies cannot.