Rishi Sunak's dilemma: The High Street vs. Amazon

Chancellor Rishi Sunak enjoys historic approval ratings, but will his business reforms cause this to change? Small businesses need the help, argues Shaz Memon

It is time to make Amazon pay their fair share, whilst allowing smaller businesses (who unlike their larger competitors, by and large pay full UK corporation tax) to transition online without any additional barriers. Collective punishment is not the solution.

Rishi Sunak has an unenviable job. On the one hand, he needs to lay the groundwork for economic recovery, which would usually be associated with lower business and household tax rates. At the same time, we are in the highest levels of public debt since wartime. In such a position, it's understandable to look for new sources of revenue, and market them as only affecting big global businesses rather than the shop around the corner.

But policies like this are atypical of a pragmatic and popular Chancellor. Moves like 'eat-out-to-help-out' and the furlough scheme have allowed Sunak to enjoy approval ratings that are the envy of Westminster: 59% of Brits believe Sunak to be doing a good job. Boris Johnson's numbers, on the other hand, are barely in the double digits.

But Sunak must not overplay his hand. The misleadingly dubbed 'Amazon tax' will not just be a tax on Amazon goods, but a 2% tax on all goods bought online. A more accurate name would be a 'high street struggling to embrace e-commerce tax'. Against rising retail job losses and business closures, 2% could be the difference between solvency and bankruptcy for many retailers – and the difference between popularity and hatred for Sunak.

The government argues that this tax will level the playing field between high street vendors and online giants like Amazon. This is simply not the case. During the pandemic, I have worked with many businesses who have shifted their operation online. With investment in Facebook advertising and a boosted digital presence, businesses have been able to swiftly bring their services online and survive, or even thrive. Whilst online sales have increased, they have often not made up for the custom lost from decreased or non-existent foot-fall. Many small businesses who have shifted online still find themselves in a precarious financial position.

Amazon, meanwhile has had a good pandemic with both its share price and its founder's net worth sky-rocketing. If anyone can afford to swallow this tax, it is online behemoths like Amazon.

Small, independent companies are already struggling to compete, since they have less efficient ordering and delivery processes. Increased prices – even by 2% – may be enough to tip their customers back into their Amazon Prime subscription. As well as a levy on online purchases, there is also the suggestion of a tax on deliveries of online goods.

Again, here the hyper-efficient infrastructure of online giants means that the impact of this tax will be easily absorbed, for example by economies of scale (multiple items being included in a single delivery and only being taxed once).

If the government wants to implement an 'Amazon tax', why not just do that? Amazon, like Sunak, has had a 'good crisis' with Bezos's personal wealth surpassing $200 billion. While no one wants to jeapordise the much-needed 27,500 Amazon jobs in the UK, the government should not be held to ransom.

Corporation tax currently sits at 19% in the UK. In 2020, Amazon paid £6 million in corporation tax (which is based on profit), despite making £13 billion in sales – a tax rate of 0.0005%. If we want to reduce the deficit, a simple place to start is to demand that companies like Amazon pay the tax they owe.

The pandemic has created a wave of entrepreneurialism in Britain. Necessity is the mother of invention, and with many Brits being placed on furlough or facing unemployment, 2020 has been a record year of new business creation, with an additional 84,758 businesses being set up in 2020 compared to 2019. We should be doing everything we can to help those businesses grow, not slapping them with new taxes.