Monday, 11 September 2017

Amazon in France:a love-hate relationship!

In just a few years, the Internet giants that even French journalists now call “les GAFA”, have made as profound an impact on everyday life in France as in most other countries. In doing so, as perfect examples of digital-driven globalisation, they have generated highly ambivalent attitudes among consumers. Quite often, the same people who engage with them intensely on their desktops or smartphones on Saturday, will vote for avowed anti-globalisation parties on an election Sunday. This ambivalence became clearer to me through two recent chance encounters.

The small Breton seaside village in which I have spent most of my summer holidays for the past 40 years has a population of about 500 for most of the year that swells to more than 10,000 during the peak tourist season. Thanks largely to the income from tourism, the village can support a small supermarket, a doctor’s surgery, a pharmacy and, somewhat surprisingly perhaps, a small bookshop selling books, maps, postcards and the like. They all manage to stay open throughout the year. This in turn means that the village is still a reasonably balanced community with people of all ages, including enough young children to justify a small primary school. It has thus escaped the fate that has befallen so many small villages in France that do not have the attraction of long sandy beaches and boat trips round the islands.

Although, like many people in France, I buy most of my books these days on-line and read them increasingly on a Kindle or similar device, I always make a point, to salve my conscience perhaps, of buying my summer holiday postcards from the bookshop in the village. I was in there doing just that this summer when another customer came in and asked for a book that the bookseller told him was out of print. He said he would try and find it through his “own network”, as he put it. Oblivious for a moment to the thin ice I was about to fall through, I ventured that it might perhaps be found on Amazon or the Amazon market place. This caused the bookseller, normally an affable and mild- mannered man, to launch into a long and blistering attack on the Amazon “bandits” who pay no taxes in France and who even manage to have their VAT refunded! The survival of his shop in the village, he went on, was due mainly to the fact that, under French law, all new books are sold at one and the same retail price regardless of their distribution channel, as well as to the presence of the supermarket, the primary school and the pharmacy next door. If it weren’t for all that, he concluded, he would have to close down his shop as there was no way it could survive by being open only during the summer.

Many politicians of course, and not just on the extremist fringes, have had a field day exploiting such sentiments and the popular media are quick to relay the complaints of “hard-working over-taxed small shopkeepers” confronted with the “freeloading Internet giants” like Amazon.  You have to go to the more serious media to find out that, at the instigation of governments confronted with the same phenomenon throughout the EU, the European Commission, among others, is working hard do something about what it calls “aggressive tax planning”. It is indeed abundantly clear that the GAFA, together with many other multinational corporations, have devised sophisticated tax optimisation strategies to avoid having to pay high rates of corporate income tax in relation to their actual sales and profits in a particular country. One article I read showed a detailed diagram tracing the multiple financial flows between national subsidiaries towards holding companies in Luxembourg, the British Virgin Islands and the State of Delaware, where corporate income tax can be minimised. As an example of one of the many and various national, EU and OECD initiatives that are currently on the drawing board, the European Commission is working on a “CCCTB (common consolidated corporate tax base) directive”. If adopted and implemented, this directive would oblige the GAFA to consolidate their revenue from all countries in the EU and pay an agreed level of tax that would be apportioned to the member states on the basis of the revenue generated in each one.

Whether the CCCTB directive, if and when it eventually comes into force, will make the position of my village bookseller any more secure is a moot point. But it would in theory put him on an equal footing with Amazon in selling books, and maybe, all other things being equal, ensure the continued presence of his bookshop in the village. That being said, as Internet becomes more and more prevalent, consumers clearly find it more convenient to buy books, as well as many other items, on-line, as the large number of other on-line booksellers testifies, not to speak of Amazon’s smothering embrace of many other retail markets.  But Amazon will probably continue to be a convenient popular scapegoat for the inevitable ills of globalisation.

But there is of course, as always, another side to the story. It makes fewer breathless headlines but will probably have an equally lasting impact. It concerns the investments made and the jobs created by the Internet giants. The GAFA have made substantial investments in France, in European or national headquarters, flagship stores, research laboratories and, as far as Amazon is concerned, logistics centres.  Over the last ten years or so, it has built four large logistics centres in France. It is building a fifth in the north of the country, an area hit by industrial decline and high unemployment, and has just announced its intention to build a sixth in the Paris area. To date, it has created about 5000 jobs.  Naturally enough, it has been encouraged to do so by generous public investment subsidies, including one of over €1 million for the building of a giant warehouse in a part of rural France where the former “minister of productive investment”, Arnaud Montebourg, used to be an MP. During his ministerial tenure, he was mainly known for his “buy French” campaigns and occasional violent criticism of globalisation. In this case, he clearly used his ministerial powers of persuasion to help the local authorities clinch a deal with Amazon.

Nor is it entirely accurate to accuse Amazon of paying no taxes at all in France. Like any business, it pays local property and business taxes and, more importantly, contributes through compulsory payroll levies to the health care and pension provision of all its French employees. One of them is a young woman I was sitting next to on a plane last year. Definitely a member of the Y generation and a child of globalisation, she was on her way to Tokyo to take up her first job as a junior manager for a French logistics company operating in Japan. A few days after my conversation in the bookshop, I found out, through LinkedIn, that she has now returned to France and taken up a position as area manager at one of Amazon’s largest logistics centres in France.  She is no doubt happy to have a good job doing what she trained to do in school.

Whether her story will be of comfort to the village bookseller in Brittany is a matter of some doubt. She, after all, is a winner from globalisation whereas he is a potential loser. I nevertheless hope that I shall still be able to buy my postcards in his shop for a few summers to come.

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