Several media outlets have reported this week that Amazon UK’s tax payments for 2016 dropped by roughly 50 percent despite amassing more than £7 billion in sales for the year.
Regardless of this significant boost in revenue, taxes for the Amazon UK Services, the branch that runs the firm’s packaging and transport, went from close to £16 million in 2015 to £7.4 million in 2016.
However, according to The Independent UK, “turnover at Amazon UK Services increased from £946m to £1.46bn while profit before tax fell from £48.5m to £24.2m.”
As reported by The Guardian, this lower tax bill is partly the result of a large £1.3 million tax credit offered by the UK government “due to a series of deductions including £36m of share awards to managers and staff.” This credit will be deducted from future tax bills.
Jonathan Easton, writing for UK tech journal PCR, says the main issue behind this seeming disparity has to do with “what tax Amazon is paying and to where.”
“Amazon has assured us that UK retail revenues, expenses and profits are reported in the UK to HMRC, but that they are made public in a consolidated account in Luxembourg, a country which has previously been branded as a tax haven,” Easton writes.
Amazon UK Remarks on Tax Disparity & Stresses Growth
Following this revelation, an Amazon UK spokesperson made it clear that the company follows the letter of the law: “We pay all taxes required in the UK and every country where we operate…Corporation tax is based on profits, not revenues, and our profits have remained low given retail is a highly competitive, low margin business and our continued heavy investment.”
Revenue will continue to grow in the UK for the American tech giant as an expansion of its operations in the country is currently underway.
The company said, “We’ve invested over £6.4bn in the UK since 2010 including opening a new head office in London and development centres in Cambridge and London this year, and creating 5,000 permanent jobs across the country in research and development, our head office, customer service and fulfilment centres, to bring our total workforce to 24,000.”
Parliament & Analysts Speak Out on Amazon’s UK Tax Obligations
Members of Parliament and tax justice advocates in the UK were not entirely happy with this disclosure.
Conservative MP Charlie Elphicke referred to the amount paid in taxes by Amazon UK as “peanuts,” adding, “People will say it's high time Amazon paid their fair share.”
Labour Party MP Margaret Hodge agreed and asserted, “It remains outrageous that Amazon are so blasé that they can ignore all the anger that their failure to pay fair tax in this country.”
Hodge added, “It is a scandal they are deliberately manipulating the way they do their business for no other purpose than to avoid tax...I hope people take a leaf out of my book and stop using Amazon.”
Liberal Democrat leader Vince Cable concurred, accusing Amazon UK of toying with the system to avoid its tax obligations.
‘This is yet another example of how companies are taking the Government for a ride and we’re going to have to look at the way we charge these companies tax. We need to shift the system so that we tax real activity and the business they do here,” he said.
Furthermore, Professor Richard Murphy of City University of London said, “Amazon is still not telling us the truth about its sales, profits and tax due in the UK. We can only see the results for its warehousing operation, and not what it really makes out of selling to us.”
“That's not good enough in a world where tax transparency is key to customer and investor confidence. It's time for Amazon to adopt the new global approach to tax accounting that's called country-by-country reporting," Murphy added.
Forbes’ columnist Tim Worstall, however, writes that few people actually understand Amazon’s CEO Jeff Bezos’ moneymaking model.
“The Jeff Bezos model is simply not to make profit thus there's little to no tax paid. That is, the Bezos model for Amazon is to most determinedly try to make money on any given line of business, but as and when that's made to then use that to fund the development of another, new line, leading to there being scant or no overall profits,” he writes.
Worstall concludes, “This isn't even tax dodging, this is exactly what we would like a company to be doing in fact. Expanding their offerings, employing more people, generally reinvesting to grow… shouting at Amazon for reinvesting gross margins, leaving little to pay tax upon, is still really not a productive endeavour.”
Is Amazon being taxed fairly in your opinion? Let us know below!