Tax Break

John Fisher, international tax consultant

Archive for the tag “amazon”

12 May 2013

Never judge a book by its e-ink screen

Books have a special place in the Senate's heart

Books have a special place in the Senate’s heart

Amazon is hardly ever out of the tax headlines these days. Following on from management’s mauling by a British Parliamentary Committee late last year and the developing Transfer Pricing dispute with the IRS,  last week all eyes were on Amazon’s reaction to the Senate’s passing of the heat-seeking, this one has your name on it A-M-A-Z-O-N, Marketplace Fairness Act. Although it is still far from certain that the legislation will get through the Cock Fight of the Republican-controlled House, the great e-tailer has been preparing itself for the day after Armageddon when Sales Tax (the US’s primitive alternative to VAT) will be charged on all e-commerce in the US irrespective of whether the seller has a “Nexus” in a particular State or, for that matter, any of the 50 States and  the District of Columbia.

As a child I was not one of the “Buy me” set so I suppose it is logical that, as an adult, I am not part of the “Must have” set. When it comes to electronic accessories, apart from the obligatory laptop and smart phone, the only consumer  device I possess is an Amazon Kindle. For the uninitiated, a Kindle is a book that lacks pages, a spine and a half-price sticker grafted onto the  front cover with irremovable super-glue.

The E-book, I am told, is the absolute future of reading.  With a Kindle you can, for as little as the price of  a hard copy from Barnes and Noble or Waterstones in a 3-for-2 deal,  have the digital imprint of the book of your choice (if the publisher has a contract with Amazon) delivered instantly all the way to your  bed or toilet seat.  And it is not just the immediate availability. The Kindle is so much more convenient than a book.

For a start, you can populate a Kindle with hundreds of titles so that, if you are traveling, you can read at least a hundred books on the plane, or in foreign business meetings or while your family is admiring the beautiful places you have come on vacation to see (we will get to beach-reading later).

Then there is the weight – the Amazon site told me that my Kindle would be as light as an average book. While I am aware that, having been around for over 3 years, my device should be looking for a partner to join it marching out of the Ark and there must now be lighter versions,  the weight claim just reminded me of all those economy fuel consumption tables car manufacturers stick on their advertisements (’50 mpg’ based on traveling through the Texas desert on cruise control at 45 miles per hour). My machine weighs in at about the same as a hardback copy of the Complete Works of Shakespeare with a piece of lead piping as a bookmark. And that is before I take into account the financially crippling leather cover with courtesy light (I suppose in case there is a power cut).

And what about that feel of where you are in a story? No longer, as you close your book, do you need to look at where the bookmark is located and think “Oh good! I am about two-thirds of the way through”. Now, with digital accuracy, you know that you only have 31% to go – although, on my antique piece of electrickery at least, I do not have any bloody idea what page I am on. And why have to flick back through the book searching for your favourite bit, if all you have to do is remember one key word like “decapitated” and the search function will take you there without delay?

But the best of all is the screen. Busy people have to snatch reading time. And that often means bedtime. I cannot count the number of times in my not-any-longer-so-short life when I have woken up in the morning to find my latest paperback lying on the floor next to me or spread across the pillow, a few pages unceremoniously creased, ready to be ironed out under a stack of telephone directories. If you have ever fallen asleep reading a Kindle, you may know that, while pages of a book can be approximately returned to their original form, it does not help to put a creased screen under a pile of telephone directories.

There was no "Do not immerse in water" warning in the instructions

There was no “Do not immerse in water” warning in the instructions

What about water? Electronic devices have a greater fear of water than the Ministry of Magic had of Voldemort. Have you ever tried luxuriating in a hot bath with a glass of wine in one hand and a paperback book in the other? Well, I have not, but I am told it is a delightful experience. While taking an E-book into the bath may not have quite the same effect on you as dropping in a mains-connected 3 Kilowatt heater  to warm up the water,  it will have the same effect on the Kindle. On the same lines, although I am not much of a beach-bum myself, it strikes me that the sand-soaked shore of the Mediterranean is not an ideal locale for a community of electronic devices.

Lest we forget, the Kindle may be the future of civilization as we know it, but Amazon has a pretty nifty business in distributing those hardcopy books we dinosaurs so love. In fact, it has the biggest business. And thanks to the Marketplace Fairness Act, it is going to get even bigger. And there is does not appear much good about that.

Currently, companies like Amazon that ship goods to your door have an advantage over regular retailers in that , when they sell into a state where they do not have a warehouse or other permanent presence, they avoid local sales tax. This has led Amazon to choose where to warehouse its goods and provide a less-than-immediate delivery service in many States. The upshot has been that traditional distributors have been able to exploit a market advantage in such States by either offering the standard walk-in shop service or same day delivery for mail orders through any one of their multiple outlets in the State. Now that it looks like Amazon and its ilk are likely to be required to charge Sales Tax irrespective of presence, they are evidently planning a massive expansion of  their warehouse facilities across the country to enable same day delivery. The end result will be that margins will be squeezed and many of the remaining book retailers will be run out of business or acquired. To me, this would be one of the biggest tragedies in the field of literature since the birth of Jeffrey Archer.

When I look back on how I acquired the modest level of knowledge I have,  school does not feature very prominently (although it was brilliant fun). I would spend literally days as a child, youth and not-so-youth hanging around my local library (where I was a one-time junior librarian) and major bookshops, picking books off the shelves and flicking (carefully) through them. As late as 2 weeks ago, I strolled aimlessly into a local bookshop and left with two great volumes that I had only vaguely heard of (I did remember to pay at the counter). While google and the rest largely compensates in the modern world for that random-walk of knowledge acquisition, the consumerization of the book market by Amazon and its friends has clearly negative connotations.

In our neighbourhood it is not always the distributors who are to blame for lack of available titles. Ask Salman Rushdie

In our neighbourhood it is not always the distributors who are to blame for lack of available titles. Ask Salman Rushdie

That is not to say that Amazon has not brought clear advantages too. Returning from Woody Allen’s delightful “Midnight in Paris” some time ago, I was able to lie in bed that very night reading Hemingway’s “A Moveable Feast” (on which the movie draws heavily) on my Kindle. Living, as I do, in the Middle East where supply of English language books is patchy to say the least , I would probably have had to wait months for a copy  if not for Amazon.

The House of Representatives would do well to tread carefully with this reform. At the same time the European Commission is currently dealing with a, not unconnected, VAT outrage perpetrated by the French government (who else?) and Luxembourg authorities (who are they?) offering cut-price VAT for e-sales within the European Union, benefiting most markedly none other than…. Amazon.

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02 Feb 2013
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What a wonderful world

Subtle

Subtle

Although we are a family of fairly avid readers, other than a few coffee-table staples, books do not  feature in our living room. Well-leafed and generally abused volumes are neatly filed on bookshelves in bedrooms and on our upstairs landing, or unceremoniously dumped in unlikely corners of the house (I stumbled on a haphazard pile on the staircase to the roof the other day). Some authors are more popular than others but we rarely sport a full set. We have all read the Complete Juvenile Works of JK Rowling (including The Tales of Beedle the Bard) but would be hard pressed to lay hands on more than two installments, both of which are by now missing critical narrative. Dickens, Austen, Le Carré and PD James are well represented in various fonts and sizes. But, perhaps our most preserved  set, neatly placed above our youngest son’s desk, is Terry Deary’s Horrible Histories.

Now, I am sure Mr Deary would not consider it  libelous were I to state that this is not great literature. In fact, I am not sure it passes as literature at all. With titles like “The Terrible Tudors” and “The Even More Terrible Tudors”, the illustration packed volumes  tell us, in graphically comic detail, just how horrible life was in the bad old days – pretty horribly.

Reading (or, to be more precise, leafing through)  the Horrible Histories, it is easy to be lulled into complacency about the present.

Heil Hitler!

Heil Hitler!

I am beginning to think that the world is not quite as nice a place as I would like to think it is. To be clear, when I say “world”, I do not mean the  majority of the 200 or so countries that constitute that  carbuncle on the face of modern civilization, the United Nations. One day, when those rogue nations are free-speech toting liberal democracies, Mr Deary will be able to make another fortune writing their Horrible Histories.  I am referring to cosy countries like yours and mine that think they are approaching the final synthesis in the Hegelian dialectic when all households will have at least one  TV in every toilet.

To be even clearer, I am also not referring to the horrendous actions of individuals and organized groups. There will always be outliers in every sphere of society. It is western governments that are the problem. They have become very good at repackaging old nasties in inoffensive euphemisms and glossy camouflage. And  if we, the silent majority, do not watch out – they will get away with it.

Take torture, for example. The activities at such sunny resorts as Guantanamo Bay are  regularly referred to as Enhanced Interrogation Techniques, which sounds like a project undertaken by a management consultancy firm. Even the mention of Waterboarding gets me humming Beach Boy tunes rather than thinking  of medieval Ducking Stools.

Even our own tax world has its fair share of practices cleaned and rebooted from yesteryear.

There was the 504 year sentence handed down last year to a Greek tax miscreant. Apart from the absurdity of a sentence that cannot possibly be served, what possesses any modern system to deprive a man of his freedom for all eternity for a crime that did not involve the taking of another life. We all (other than many of the members of that august institution, the  United Nations) are appalled by stories from more than 200 years back of young men being hanged for stealing sheep.  To all intents and purposes, there is not a colossal difference.

"Tell us the whereabouts of your father, boy, and we will give you $104 million"

“Tell us the whereabouts of your father, boy, and we will give you $104 million”

And what about the award  of $104 million that the IRS made last September  to a single Whistleblower in the UBS case? The first thing that came into my mind when I read the story was W F Yeames’s painting of a Parliamentarian’s  interrogation of two young children in the English Civil War, as he tries to establish  the whereabouts of their father. If there was one quality rammed into me by the British school system it was the Eleventh Commandment, “Thou shalt not sneak”. Honour among thieves was a real value and we would have rather faced the stick than split on our schoolmates. To be fair, teachers expected and respected that behaviour and often punished the snotrags that “told tales” (mind you, it didn’t stop the bloody sadists using the stick anyway). Waterboarding, at least has the possible justification that its use might save many lives. What is the IRS’s excuse?

Then, a few short weeks ago, none other than Her Majesty’s Revenue and Customs, for the second time in less than 6 months, published on Flickr mug shots of the 32 “Top Tax Criminals of 2012” .  When I was a kid, I used to pass a big blue plaque every day in our local high street that read “On this site stood the Parish Cage or Lock-up”. My (incorrect) assumption throughout my childhood was that this was the site of the local Stocks, where petty criminals would have their heads, hands and feet secured, allowing passers-by to take free aim with eggs and tomatoes from the nearby Tesco’s that had passed their sell-by dates. I actually had a taste of this as a young (innocent) adult. In charge of a children’s summer camp one rainy August, my team organized a Summer Fare. One of the star activities was throwing anything that went mushy on impact at yours truly tied helplessly to a chair.

Publishing the photos is the same concept of public humiliation that I thought had gone out with the Stocks and Public Executions outside Newgate in the 19th century. What is more, all but one of the wretched cons are behind bars already serving out their sentences and they are unlikely to be seen around town for some time to come. So what was achieved?

There is one thing, though, that can be said in favour of the British system. Publishing the photos HMRC announced that they were serving a collective 155 years and 10 months in prison. Had this been been Greece, that wouldn’t have even covered the third off for good behaviour of a single one of them.

I am not an anarchist. I passionately believe that people should not be allowed to break the law with impunity. However, the punishment should fit the crime. Furthermore, governments should think about the negative effects on society as a whole of efficient but, essentially unethical, laws and practices. There has been a lot of publicity recently about the outrage of the British Parliament over the tax practices of US multinationals. As I reported a few weeks back, Margaret Hodge – who led a Parliamentary investigation – told the representatives of Google, Amazon and Starbucks: “We are not accusing you of being illegal, we are accusing you of being immoral”. I suggest you get your own House in order first, dear.

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