Wednesday, May 01, 2013

FT opinion writer "gets it" on Amazon's rent-seeking

As part of the Financial Times' mostly excellent series on tax "competition" (for more on that, see here,) they are running an opinion article entitled Amazon proves it is king of the political jungle.

We won't dissect the article in detail: we'll just cut and paste one section which reveals how the writer, Jacob Weisberg, has properly understood the fundamentals of what he is looking at.
"Online businesses have been able to avoid collecting sales tax based on state laws dating from the era when local shopping was the norm.

As Amazon expanded, its chief executive Jeff Bezos treated this anomaly as a right and deployed the techniques of rent-seeking to protect his advantage. He spent millions of dollars on lobbyists... Amazon’s smaller competitors struggled to make their case. Nor was there any customer constituency for tax collection, even though consumers paid indirectly through diminished public services.

At the state level, Amazon became a litigious bully, an instance of the modern company powerful enough to dictate terms to impoverished sovereigns."
And there, in the bits we've highlighted in bold, you pretty much have it all. Anyone who's read the chapter on the Vesteys in the book Treasure Islands will note the similarities.

It's superb to see the world's writers now routinely starting to expose tax avoidance for what we have always said it is: unproductive, market-distorting rent-seeking that erodes democracy and comes at wider costs to the rest of us.

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