Thursday, 20 December 2012

Amazon - What is the Answer?

I just received an email from asking me to sign a petition setup by two independent book retailers, Frances and Keith, who run bookshops in Warwick and Kenilworth. They have now become the pin-up couple for the UK Independent bookselling industry - sexy ain't they!

Their petition, signed by 17,000 people so far, will be delivered to Amazon in order to try and persuade them to pay Corporation tax. It's estimated that if they did take their profits in the UK, they would pay around £100 million per year.

I have signed their petition because they have at least made an effort to bring greater publicity to this issue, which in turn makes it more likely that the government will focus on the issue, but really, trying to pressure Amazon into donating money to the UK government really is not the answer to their problems or the wider problem.

There are two issues here:

Firstly Frances and Keith are in a dying business. With a fairly solid forecast of around 10 million tablets in the UK by late 2013, the future for old fashioned bookshops is bleak to say the least. Kindle and iPad plus Kindle Apps on Android platforms etc are in the process of killing paper and with that books and bookshops. The 'Paperless Office' type revolution predicted in the 1980s is finally happening. Finally it seems, we don't need to chop down trees any more to communicate.

I do sympathise with Frances and Keith. It must be really tough to have built a small business that you probably hoped to sell as a profitable going-concern at some point in the future, only to realise that the world has moved on and left you feeling left behind.

But Amazon paying a bit of tax to the Treasury is not going to change the fundamentals of that business. As more and more people buy e-books, less and less are going to go to retail shops to buy old fashioned paper based books.

The second issue is this:

It's all very well beating up people like Starbucks, Google and Amazon for taking their profits in other countries in the hope that they will donate some cash to the UK Treasury but it really is not realistic or sustainable. Starbucks have made a pledge, but only because people can easily boycott their shops and visit any one of the other shops on the high street.

Amazon have such a massive competitive advantage, there is a huge premium to be paid to go elsewhere and Google have almost total domination of Adwords style advertising so there's no other option.

The only way that the UK can win here is by the UK Government making our Corporation taxes the most competitive in the world (Osborne announced an aim of reducing them to 20% by 2020 at the last budget statement and is steadily reducing them now) so that companies that practically can, are incentivised to take profits here, and by making the UK the best place to startup new businesses with global scope - particularly technology businesses.

I love the idea of People Power - but unfortunately in this instance it's nothing but a sexy, romantic notion.


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