Amazon gets its tax excuses in early amid rising UK profits – but leaves El Reg off the press list. Can't think why
- Reference: 1600420808
- News link: https://www.theregister.co.uk/2020/09/18/amazon_uk_results/
- Source link:
Last week, El Reg was told Amazon had approached The Guardian , the BBC, and other national outlets to discuss its 2019 figures for the UK ahead of the data being made public. During these briefings, the web goliath highlighted its more flattering numbers. In recent years, the business has come under fire for its [1]hyper-tax-efficient processes .
The charm offensive had mixed results: last Wednesday, [2]Old Auntie didn't rock the boat , though [3]The Graun did . The strategy seemed to be to select certain outlets so that when the profit-and-loss accounts were published on the Companies House website – as happened yesterday – the story would already be a week old.
It's almost as if somebody had a guilty conscience, though to have a guilty conscience, one must have a conscience in the first place.
We decided to wait for the official numbers for Amazon UK Services to drop and become public before we dived in. The tech titan's [4]paperwork , for the year ending 31 December 2019, must have made joyful reading for shareholders, if not so much for tax inspectors.
Now on Amazon Prime: The Amazing Shrinking UK Tax Burden [5]READ MORE
A subsidiary of Amazon.com, the purpose of the UK company "is the provision of fulfilment and corporate support services to other Amazon group undertakings." Cloudy wares or anything more specific were not included due to how Amazon channels its revenues around Europe. As an example, AWS UK revenues get reported as part of Amazon Web Services EMEA Sarl. Tax payments are made through its UK branch to British tax collector and Amazon customer HMRC. Not the most transparent of operations.
As for what has been filed, the company recorded £3bn in sales, up 30 per cent from £2.3bn the previous year. Profit before taxation was up 35 per cent, to £101.9m from £75.4m. Tax payments, however, remained almost unchanged, standing at £14.5m for 2019 compared to £14m previously.
Once deferred tax was taken in to account, the tax on profit stood at £6.3m, an improvement on the £1m of last year.
What was not an improvement on [6]last year was Amazon's [7]defence of its UK operations, which was sent some days ago to select outlets and others on request. While the figures submitted to the UK government's Companies House declared £3bn in revenues, Amazon's glossy PR release boasted that all UK operations (including those hidden behind the corporate curtain) actually generated £13.73bn, up 26 per cent from £10.89bn. It also said that its total tax contribution had increased to £1.147bn, up 45 per cent from £793m.
Alas, even that £1.147bn figure is not quite what it seems. By the company's own reckoning, £854m of that were "indirect taxes" and were "largely driven by net VAT due to an increase in sales and employee taxes as the result of headcount growth and wage increases."
Employer taxes accounted for the biggest chunk of the remaining £293m, with corporation tax trailing behind business rates. Trailing by how much is anyone's guess – the company didn't publish a detailed breakdown.
Amazon, which is very happy to use the UK's transport infrastructure when shunting its boxes around, was keen to brag about the 30,000 people it employs in the UK and the £23bn it claims to have invested in the country since 2010.
Others were less impressed by the antics of Bezos' gang.
Dame Margaret Hodge, Labour Member of Parliament, gave the company short shrift, telling The Register : "Another day, another dollar as Amazon's wicked approach to taxation seems to go on unabated.
"The corporation is flush with cash and the fortune of owner Jeff Bezos has soared to make him the richest person in the world. Yet Amazon ducks its responsibilities to UK taxpayers by shifting profits offshore using opaque corporate structures."
Paul Monaghan, head of the [8]Fair Tax Mark campaign group, told us: "Amazon refuses to disclose exactly how much profit it makes and tax it pays in the UK in total.
"Much of their UK income continues to be shunted to Luxembourg, where there is a 'loss-making' subsidiary that is not only not paying tax, but is generating enormous tax reliefs that can be used in the future to ensure that little or no tax continues to be paid.
"Amazon is growing its market domination across the globe on the back of income that is largely untaxed – allowing it to unfairly undercut local businesses that take a more responsible approach."
UK taxman spent six times more with AWS last year than cloud firm paid in corporation tax [9]READ MORE
Dame Margaret agreed. "While high-street businesses struggle and regular taxpayers pay their fair share, it's deplorable that the wealthiest corporations in the world will move heaven and earth to avoid paying their taxes.
"The only solution is more transparency for corporate taxation. The government must act urgently to implement public country-by-country tax reporting so that we can see where companies are making their profits and if they are paying fair taxes."
"To rectify matters," Monaghan told us, "governments [need] to get together and rip up the international rule book that has been in place for nearly a century, and move instead toward something called 'unitary taxation'."
Under such a system, profits would be apportioned to each country for taxation based on where the economic activity actually takes place. "For Amazon," he said, "this would likely see a significant increase in the corporation tax paid in the UK."
Unsurprisingly, vested interests and a number of tech giants are keen for that not to happen.
Potential reform on international tax rules is indeed in the works, with discussions being held by the G7, G20 and OECD, though a consensus may take some time. As a result, the UK instigated a [10]two per cent tax of digital corporations's revenue. [11]Amazon offset this by charging third-party suppliers that use its marketplace a two per cent increase in fees.
Rival [12]eBay took the tax charge on the chin, perhaps hoping to carve out a competitive advantage.
In the meantime, "the UK's tax authorities also need to be much more assertive," said Monaghan. "We've yet to see the claw back of tax avoided in the past like we have seen in [13]France and [14]Italy in connection with Amazon."
A spokesperson at Amazon sent us a statement:
The UK has now become one of Amazon's largest global hubs for talent and this year we announced plans to create 10,000 new jobs in the country by the end of 2020, taking our total workforce to over 40,000.
Corporation tax is based on profits, not revenues, and our profits have remained low given retail is a highly competitive, low margin business and we continue to invest heavily.
The company did not comment on the taxes its higher-margin Amazon Web Services operation pays. The Reg would like to make clear that Amazon operates within the law when it comes to paying its dues – though, ethically, it stinks. ®
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[1] https://www.theregister.com/2018/08/03/amazon_might_pay_some_uk_tax/
[2] https://www.bbc.co.uk/news/business-54082273
[3] https://www.theguardian.com/technology/2020/sep/08/amazon-uk-pays-3-more-in-tax-despite-35-rise-in-profits
[4] https://beta.companieshouse.gov.uk/company/03223028/filing-history
[5] https://www.theregister.com/2019/09/09/amazon_the_amazing_shrinking_tax_man/
[6] https://www.theregister.com/2019/09/09/amazon_the_amazing_shrinking_tax_man/
[7] https://blog.aboutamazon.co.uk/jobs-and-investment/2019-amazons-economic-impact-in-the-uk
[8] https://fairtaxmark.net/
[9] https://www.theregister.com/2019/06/11/aws_uk_tax_cloud/
[10] https://www.gov.uk/government/publications/introduction-of-the-new-digital-services-tax/introduction-of-the-new-digital-services-tax
[11] https://www.theregister.com/2020/08/13/ebay_not_passing_on_digital/
[12] https://www.theregister.com/2020/08/13/ebay_not_passing_on_digital/
[13] https://www.ft.com/content/8237140e-0a67-11e8-8eb7-42f857ea9f09
[14] https://www.reuters.com/article/us-amazon-italy-tax-idUSKBN1E91KM
[15] https://whitepapers.theregister.com/
Re: Not the fault of Amazon
Yea but come on, its really hard to work out how to publicly prevent these shinnanigans while still keeping it legal to pay your mates and profit on the sly - give the MPs a break! If they make it too hard, there will be no cushy job waiting for them when they get voted out, and the opposition will just open a loophole once they're in anyway, so really there is nothing to be done and we should all be grateful that the Americans let us keep any of our money at all
Re: Not the fault of Amazon
While I agree with the basic issue, that the laws need to be changed, the whole avoidance / evasion discussion is misleading and used by businesses to justify what they do as being completely legal. In effect they are publishing one set of accounts to the tax man which represents an artificial company structure and actually operating in a completely different way. As mentioned in this article, where they have declared to the tax man that the UK has 3 Billion revenue, but then declaring 13+ Billion UK revenue to the shareholders - to me that is effectively lying about your revenue, as both cannot be correct.
Take for example the ability for small businesses to claim tax on legitimate expenses. If a company claims a specific value in expenses which is higher than they really are entitled to, then they are using a valid tax avoidance method, but not being honest with the figures. The difference between a small company and Amazon, is that the tax man can easily audit small companies and determine the fraud, while they have no realistic possibility of doing it with Amazon, as the structures are so complex and they have unlimited funds to fight any legal case.
So for me, these large companies are committing tax evasion, but it is not realistic for this proved conclusively given the complexities involved.
Re: Not the fault of Amazon
I wish Margaret Hodge would understand this.
EVERY time theres some, usually Amazon, tax article, she dribbles the same crap about how they're being, basically, "dishonest" and not paying the taxes they should, as if it's entirely Amazons fault, rather than how tax law works in the UK. I bet she wouldn't voluntarily pay extra tax, just because she earns more than minimum wage.
Maybe she should start campaining for the Government, doesn't matter which one, to tax money leaving the country instead, that would catch everyone "sneaking" cash away.
There is a possible way of getting tax out of them.
This would work for other online sales such as AO as well.
If a product is bought online from a company with a turnover of £X, then the dispatch point is taxed as shop would be. I.e. no longer a warehouse, but a retail outlet.
Same old, same old
Just file "tax avoidance by large multinationals" along with all the other things that the opposition always vehemently criticizes, and the government always tacitly encourages, whichever party is in power. It's been like that all my life.
And expect normal service to continue as normal after the two parties reverse their roles in 2024. Covid- and Brexit-supercharged deficits will require very large tax rises for all the little people, but not for anyone who matters.
Indirect Hit
Direct taxes are, in theory, the fairest taxes whether personal or corporate. Regrettably they are also the easiest to avoid if you can afford to. Amazon can. Nowt's going to change that.
Bellyaching about their corporation tax is righteous but self-defeating. If they double it next year - so what? It's just possibly a new ward for a hospital. It still isn't going to register at government tax income levels. I'm afraid indirect taxes is the way to get this monster to shoulder its responsibilities to us. Sales taxes - forcing them to pay decent wages so more tax gets payed by employees is a win-win for the people and the nation. Taxes on their delivery network to better represent their use of public infrastructure, taxing their real carbon emissions - and so on.
Each not only help paying for the access to our markets but, as much as possible, directing them to do the right thing profitably.
There's a more general problem here
The online giants are getting all the attention, but it has never been just them. The longer established firms have been playing similar games all along, it's just business as usual.
Personally I'd ditch corporation tax altogether because it's just too easy to game. For very large turnover values, reduce the VAT that can be refunded. VAT is charged at 20%, refund 19% after £1 billion. Or some such, I'm sure we could set the values so that most companies that have been playing fair would pay a similar amount as before. (If you can find such a beast. Unicorns, virgins, and honest tax returns... )
Not singling out any particular industry has political benefits too. The Donald has already threatened us with a trade war if we attack US based tech companies, so we could demonstrate that we weren't. (Not that facts are very persuasive, of course.)
Improvement
"the tax on profit stood at £6.3m, an improvement on the £1m of last year."
Is that an improvement from Amazon's point of view, or from everyone else's?
Transfer Pricing
Transfer Pricing is how these companies syphon taxes out of countries and into a low tax location.
That Mega Corp logo on the packaging? $5 per use payable to the IP owner of The Logo - Mega Corp Cayman Islands Ltd. The carboard box? Patent owned by Mega Corp Cayman Islands Ltd and it costs you $10 per time you make one..... and so on. Just so happens that $15 is most of the profit on each sale, funny that. UK branch of Mega Corp sadly reports each year it made hardly any profit. Meanwhile in the Cayman Islands, Mega Corp have agreed to build a school or some money into the civil service retirement fund in return for paying $1000 of tax - afterall, they only have a mailbox address there at an office of a law firm.
It has fully legit purpose, of course, its just they like to play the game and abuse it. It remains totally legal however.
It is possible to counter it, assuming of course the normal process of democratic government isn't subverted by lobbying or being lent on by a government of the country where the giants come from...
https://www.taxjustice.net/topics/corporate-tax/transfer-pricing/
You can add another
objection to amazon including employee taxes as 'tax paid by amazon'
It isnt paid by amazon , its taken from the money amazon pays its employees with (whether said employees want the government taking 30% of their wages or not)
The only employee tax is employer's NI contribution
But as previous comments have said the only thing enabling the likes of amazon to move its profits out of the country are the very politicians who are saying how immoral it is that they are moving profits out of the country......
Not the fault of Amazon
Amazon ducks its responsibilities to UK taxpayers by shifting profits offshore using opaque corporate structures.
Amazon's responsibility to UK taxpayers is to obey UK tax law.
governments [need] to get together and rip up the international rule book that has been in place for nearly a century, and move instead toward something called 'unitary taxation'.
Precisely. If a government wants Amazon & their ilk to pay more tax, the solution is in their own hands. Change the laws that are preventing it. Moaning that they should pay more than the law requires because it would be "fair" is never going to cut it.
We've yet to see the claw back of tax avoided in the past like we have seen in France and Italy in connection with Amazon.
Avoiding tax is perfectly legal, it's tax evasion which isn't. If a company has avoided tax by exploiting loopholes in tax law, there's not much grounds for "clawing it back". Removing the loopholes for future payments is the way to go.
Tax law is like so many other old laws, every time someone finds a loophole, a government will draw up a band-aid law to close the loophole, and that often opens others. It's a pile of warts on warts on warts.