Friday, 16 November 2012

On Amazon

If it was tax avoidance by competitors, such as Amazon, that destroyed HMV, and may now destroy John Lewis, doesn't that tell us something about tax incidence?

If tax avoidance gives a competitive advantage... then don't we have to assume that the 'benefit' of it is being passed on to the consumer? And that if the avoidance is stopped, the consumer will be asked to foot the bill in terms of higher prices?

Of course, it is not that simple. There are many differences between a high-street retailer and an internet retailer. Each confers an advantage on one or the other. High-street retailers get immediacy, and no postage costs. Internet retailers get lower storage costs, better consumer data, and the chance to pay tax in Luxembourg. Further, if a company can save £1 on tax, but only needs to give 50p back to the consumer to win the sale, then that is what will happen.

But when all is said and done, these companies operate in competitive and open markets, and the beneficiaries of their lower costs are, first and foremost, the consumers.. for lower costs enable lower prices, and lower prices are what wins the sales in the first place. And where tax dodges are (theoretically, at least) available to all, we should see the market, eventually, price them all in so that the most powerful person in the retail cycle, the consumer, is the one who wins.

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