Amazon has paid no UK corporation tax

by Mark Tyson on 5 April 2012, 13:27

Tags: Amazon (NASDAQ:AMZN), Play.com

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Over the last 3 years Amazon UK sales have totalled over £7.5 billion, some estimates put the figure as high as £10.3bn. All this income has resulted in a tax bill from HMRC of zero, nothing, nil. This is quite a revelation. As it follows news of so many other people in Britain being squeezed for more tax including Channel Islands based online retailers like Play and 7DayShop who only avoided the VAT on small purchases like CDs and DVDs, under the threshold value, currently £18 per packet. If I remember correctly my son bought his Xbox 360 from Amazon.de and saved a lot, it was a very hot deal at the time. Amazon.co.uk is the UK’s most popular online retailer and winner of best customer service awards. Often buyers prefer to use Amazon when prices match between online retailers.

 

 

Looking at the profit margins at Amazon.com in the US, said to be approximately 3.5 per cent, if this also applied to UK sales then Amazon would owe the treasury £100,000,000 - count those zeros! Also in the US Amazon is currently disputing a tax bill approaching $1 billion. This is to do with Amazon transferring goods between its multinational constituents to avoid tax charges. In addition to this Amazon uses the difference in US state tax regimes to its advantage, a loophole that is tightening right now. Incidentally Amazon is under investigation for its tax contributions in other countries, nearly all the countries it operates in, including; China, Germany, France, Japan and Luxembourg.

 

 

Amazon argues, in a statement to The Guardian that its UK operation is only for fulfilment of orders taken by its Luxembourg business: "Amazon EU serves tens of millions of customers and sellers throughout Europe from multiple consumer websites in a number of languages, dispatching products to all 27 countries in the EU. We have a single European headquarters in Luxembourg with hundreds of employees to manage this complex operation." Figures from 2010 accounts show a skewed picture - the Luxembourg operation employs just 134 people yet generates £6.5 billion, whereas the UK operation employs over 2,000 employees with a turnover of just £147 million...

Many people will feel that since Amazon and the other off-shore retailers have managed to contribute to the demise of several high street chain stores it really is their duty to pay up the tax they owe.

HEXUS Forums :: 26 Comments

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Posted by Jimbo75 - Thu 05 Apr 2012 13:34
Welcome to free trade I guess.
Posted by Phage - Thu 05 Apr 2012 13:40
Hardly news.
http://en.wikipedia.org/wiki/Transfer_pricing
Posted by cameronlite - Thu 05 Apr 2012 13:41
The second to last paragraph should say “2,000” not “2,00”.

As annoying as it is, if the system is broken, why not take advantage of it? EVERYBODY else does.
Posted by debs3759 - Thu 05 Apr 2012 14:09
I say make them pay or shut down their UK operations. Why should such a large company get away with robbing the UK tax payer of such huge sums of money? Just because others get away with it doesn't make it right (otherwise I would go rob my local post office - after all, others have done the same thing and got away with it!).
Posted by Saracen - Thu 05 Apr 2012 14:36
debs3759
I say make them pay or shut down their UK operations. Why should such a large company get away with robbing the UK tax payer of such huge sums of money? Just because others get away with it doesn't make it right (otherwise I would go rob my local post office - after all, others have done the same thing and got away with it!).
Oh, that's a wonderful idea.

Then, they won't be paying any VAT on the profit margin on those billions of pounds in sales, and they won't be paying employer's national insurance on 2000 people's salaries, and their employees will be claiming the dole instead of paying income tax and national insurance to the tune of, what, about a third of their earning above the level of basic personal allowances.

You'd need to tale a long, hard look at Amazon's accounts before being able to draw any sensible conclusions about their corporation tax position. For a start, you'd need to look at the extent of capital investment programs and how they're financed, because at the very least, the annual cost of most of that financing is likely to be offset against profits.

Does anyone here have any real grasp on the level of expenditure necessary to set up a major warehousing and distribution operation? The level of up-front costs for equipment, for instance? Because an element of that capital will depreciate, every year, and will be offset against profits before tax. And the expenditure is HUGE when you're setting up custom-built and custom-equipped warehouses.

Are Amazon avoiding tax with sneaky corporate structures, and international transfers? Quite possibly. But unless you've analysed their accounts, you simply don't know. But if they are, then the solution is to change the tax laws, and shut loopholes …. which is not as easy to do as it sounds, especially where EU laws are involved. But suggesting they are just forced to shut down is sheer idiocy.

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