Amazon UK pays £1.7m corporation tax

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They are at it again. In a year when profits apparently hit £80m on turnover of a touch under £2bn, the UK arm of Amazon has paid corporation tax of just £1.7m, despite having almost doubled its operating profit.

The true situation is actually far more depressing: Amazon UK Services Limited largely deals with logistics, and sales are filtered through Luxembourg (there's a surprise).

On the face of it, this cannot be right. Why are some of the biggest companies in the world allowed to shelter their tax profits by claiming that sales are made in tax havens (or if you prefer, low tax territories), when anyone looking at the business would come to completely different conclusion regarding the location of the trade?

Yet again, the tax authorities seem to be up the South American river without a paddle, practically ridiculed by this multinational conglomerate and the advisers who ensure that its liabilities are at the kind of levels that no individual could dream of without indulging in outright evasion.

I cannot believe that after all these years there is no solution to this issue. Many readers will immediately respond that Amazon UK Services Limited is merely paying the amount of tax that is legally obliged to settle under domestic rules. This may well be right. However, if that is the case, isn't it about time that the law was changed?

Those in the tax avoidance industry, including so many accountants, will instantly protest that the law is designed to collect the correct amount of tax. These days, that is disingenuous.

Tax law in the UK and also internationally was created before the world went digital and shrank. While many of the existing provisions would be effective if Amazon traded in the UK and nowhere else, they are clearly laughably avoidable in the current day and age.

If the UK tax authorities and government are unable or unwilling to take the necessary actions, then surely it is time for the OECD and others to step in, making some swift and effective changes that will help to redress the balance.

I look forward to a tirade of negative reaction from those who believe in riding the wave of old-fashioned, ineffective tax legislation. But some readers might begin to wonder why they are paying tax at effective rates that are around 10 times those of one of the largest corporations in the world.

About The Imprudent Accountant

About The Imprudent Accountant

Someone who should know better, but can't resist the occasional rant about the more exasperating aspects of the accountancy profession.

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03rd Aug 2018 09:29

Weren't Gvt talking about legislation to counteract diverted profits, then went very quiet on it?

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By Dib
to SteLacca
03rd Aug 2018 14:27

The diverted profits tax (DPT) is in place and has been since 2015. According to a recent article on Croner-i, the amount collected from DPT increased by over a third to £388m in 2017/18, up from £281m in the previous year. The tax burden on businesses from DPT is significantly higher than first anticipated and exceeds the forecasted £360m that the Exchequer anticipated would be the impact of DPT. Since the tax was introduced estimates for revenues have been exceeded every year.

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03rd Aug 2018 11:53

It's rather telling that this article has been written anonymously (clients would not like to be given the impression their accountant might not be fully on their side).

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03rd Aug 2018 12:29

Isn't it more like £4.6m they paid, there was a deferred tax adjustment of £2.9k which brought it down?
I was getting cross with the poorly written BBC article this morning and had to resort to going to cos house to work out what the heck they were trying to say.

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03rd Aug 2018 12:33

I thought transfer pricing should fix this mess and ensure Amazon's UK companies and branches pay the "right" amount of tax.

I really don't understand what HMRC are doing in this connection and why they are not making more noises one way or the other. If HMRC accept this to be correct surely they should try to explain why, given the public interest in this story.

I have two observations regarding Amazon: firstly the subcontracted delivery firms/drivers are not paid enough to cover NMW pay levels, so Amazon internally are not willing to transfer more profit to subsidise the delivery process.

Secondly, Amazon do not seem to care about negative publicity. If I was in their position I would be spending big on PR to explain why this is (in Amazon's view) the right amount of tax and to try to dispel myths that their UK operations should recognise a commercial profit in the UK (under transfer pricing). While this PR may be a heap of donkey droppings, at least they could appear to have a justification for sticking two fingers up at HMRC/UK taxpayers.

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By NH
05th Aug 2018 07:38

I really hate these articles that deliberately give a negative slant and are too lazy to look at the bigger picture. For example would the author like to tell us how much in other taxes Amazon contribute to the UK, employers NI, business rates etc

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to NH
06th Aug 2018 09:55

NH wrote:

I really hate these articles that deliberately give a negative slant and are too lazy to look at the bigger picture. For example would the author like to tell us how much in other taxes Amazon contribute to the UK, employers NI, business rates etc

Remember Amazon outsources much of its delivery work, so does not pay a massive amount of other taxes.

From the accounts there seems to be nearly £2bn of income and £0.6bn staff wages. The social security paid is £54m, so 2.7% of turnover. There is also the £1.7m CT and that's about it. VAT is paid by the consumer, so is not a tax paid by Amazon.

Does HMRC really believe that £1.7m is the right amount of CT?!

I just wish I could find another world-leading retail offering that offers next-day delivery for such low costs. I just cannot work out how they can do this - they must be saving so much money. Wakey, wakey, HMRC!!

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By NH
to alan.rolfe
06th Aug 2018 10:08

Not that I am defending big business, but in that case where are the headlines that say "Amazon pay 54m NI into the UK economy"
The outsourced workers also pay tax and NI one would presume....

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to NH
06th Aug 2018 17:38

The outsourced workers probably keep their earnings below the personal allowance and/or claim a load of working tax credits - the biggest subsidy to business they've ever had which means they don't need to pay staff properly as they know the government will do it.

I doubt they are "wiping their faces" as far as tax paid vs what they cost the country. But that's another topic entirely.

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06th Aug 2018 11:45

I understand that Amazon's online shopping service is not actually profitable in most markets. Amazon makes most of its money from its digital services, primarily Amazon Web Services. AWS is mainly used by large corporates (e.g. Netflix) to deliver digital services to their global customers. AWS is increasingly being used by the UK public sector too.

Digital services like AWS are very difficult to tie down to specific tax jurisdictions because national tax laws and international tax standards are wide open to income diversion. What gets me is politicians who name and shame legitimate businesses instead of doing their job by enacting new tax laws and negotiating new tax treaties.

It should also be noted that company directors have a legal duty to maximise returns to shareholders, so they can hardly be blamed if they legally minimise the tax paid by the company.

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28th Aug 2018 15:16

As lazy an article as any I have read in the media.

Amazon's a world-wide business. It makes sense to centralise sales operations and if you were looking for a centralised location in Europe what would you look for? The highest taxing country? The article makes it sound like Amazon's clever tax advisors are running rings round a hapless HMRC. There's nothing cunning or devious about Amazon's plans and HMRC are bound by the law just as much as Amazon are.

There's this lazy idea out there that the UK should rightfully tax all UK businesses for all their sales wherever they are in the world AND tax all UK sales of all other businesses no matter where in the world the business is located. I think other countries tax authorities might have a problem with that.

And then there's the practicalities. You want to tax a French company that sells a toaster to a UK customer? Good luck forcing the French company to submit a tax return. Good luck forcing the company to hand over the tax. And even if you could set up such a system, what would that do to small businesses looking to expand? You want every small company to file a tax return (under different rules and rates) in every country it exports to? Goodbye international trade for all but the biggest companies.

And back to Amazon. I read that bonuses paid to staff reduced Amazon's taxable profits. Shock horror. Company uses 'tax dodge' of paying staff to reduce CT profits. What next? A fish and chip shop lowering its profits by buying fish and potatoes?

The author of the article blames the 'tax avoidance industry'. What tax avoidance? I'm not guilty of 'speeding fine avoidance' if I travel at 29 mph in a 30 mph zone, I'm obeying the law. Is the author seriously saying that he has advised clients to take a course of action they need not, just so they can pay more tax than they need to? Like saying, "Hey, drive down that road at 60. You'll get a fine. Think what good that'll do to the nation's coffers if you do it twice a day".

And has that much really changed to the concept? If 40 years ago I would have phoned a Parisian book shop and ordered a book, it's obvious that the profits arise in Paris and are taxed in France. What's changed now that I do that on-line?

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