Amazon will avoid tax on digital services in the UK, which will hit the small traders

Amazon will not have to pay the UK’s new digital services tax on products it sells directly to consumers but small traders who sell products on its site will face increased charges.

The tax, which aims to get tech companies such as Amazon, Google and Facebook to pay more tax in the UK, is forecast to eventually bring in about £500m annually to the exchequer.

Along with Google, Amazon has already stated that the 2% tax on revenues made in the UK will be passed on to sellers and advertisers who use their platforms.

According to a report in the Times, Amazon, which paid only £14.4m in corporation tax on total UK revenues of £13.7bn last year, will not have to pay the tax on goods it sells directly.

The new tax is not being levied on sales, which would also penalise online retailers such as Tesco and John Lewis, but on the service fees that companies such as Amazon and Google charge third parties.

With Amazon’s third-party sellers facing a 2% rise in the amount they pay, the US retailer is effectively getting a price advantage on competing goods it sells directly to consumers.

Last month, Google told its tens of thousands of advertising clients in the UK that from November it will charge an additional fee for ads served on Google and YouTube to cover the new 2% UK tax. The move is estimated to add about £120m annually on to marketers’ costs.

In June, the UK and other European countries said they would still implement a digital tax despite the US pulling out of negotiations with the OECD to implement an internationally agreed version.

A spokesman for Amazon said: “Like many others, we have encouraged the government to pursue a global agreement on the taxation of the digital economy at OECD level rather than unilateral taxes, so that rules would be consistent across countries and clearer and fairer for businesses.”

Google UK reported £1.6bn in revenues last year, up from £1.2bn, but paid only £44m in UK corporation tax.

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