Amazon under fire over £2.5m tax on £4bn UK sales

Amazon's Dunfermline unit. Picture: Phil Wilkinson

Amazon.co.uk’s £2.4m corporation tax figure almost exactly equals the amount pocketed by the firm over the same period in government grants aimed at attracting the corporate giant to the UK, new accounts filed with Companies House have shown.

The firm’s figures for 2012, published yesterday, have sparked anger among unions and politicians and renewed calls for the company to be barred from further handouts until it pays a fairer share of tax.

The UK government has insisted that cracking down on companies and individuals that avoid tax is a major priority and has called for closer collaboration between European nations to share tax and financial information.

Alongside companies, including Starbucks and Google, Amazon has come under attack in recent months for its minimal UK tax payments.

Peter Walsh, Scottish spokesman for union Unite, warned the latest Amazon tax payments were a “drop in the ocean” compared to its vast UK sales figures.

“We desperately need to look at tax reform and how to achieve tax justice,” he said. “The taxes they pay, combined with the fact they are a low-wage, low-skills employer, poses the question as to what benefit they bring to Scotland and to the UK. We have put significant public funds into luring this employer here and this is what we get back.”

First Minister Alex Salmond has previously spoken of what he described as an “historic” deal that saw Amazon set up a distribution centre in Dunfermline, alongside its customer call centre in Edinburgh.

Tory MSP Alex Johnstone said he supported UK government attempts to stamp out the ability of firms to hide in tax havens such as Luxembourg, where Amazon has headquartered the parent company of its UK arm.

Mr Johnstone said it was wrong for such countries to be able to protect “tax parasite” companies from paying taxes in the country where they had generated profits.

“It is fundamentally dishonest to take advantage of these grants and then deliberately organise their tax affairs so that taxes are not paid to the country that provided the support.”

Labour MP Nick Smith said that he wanted the tax authorities to take a close look at Amazon, describing its tax payment as “pathetic”. He said: “HMRC (HM Revenue and Customs) should be going through this company’s tax arrangements with a fine-tooth comb.”

Accounts for Amazon.co.uk’s parent company in the US show that the amount generated in sales by its UK arm totalled $6.5bn (£4bn) last year.

The latest accounts for its UK arm also details £2.5m of government grants – paid by both Westminster and Holyrood.

Westminster’s public accounts committee last year accused HMRC of being too lenient in the way it dealt with big-name firms, which it said were “getting away with” paying little or no corporation tax. It accused Amazon and others of “immorally” minimising UK tax.

David Lonsdale, assistant director of Confederation of British Industry (CBI) Scotland said: “The CBI is clear that firms operating in the UK need to do a better job of explaining their tax affairs to the public. We are encouraging firms to explain why they pay what they do in a straight-forward, transparent and accessible manner.”

A spokeswoman for the Scottish Government said that Holyrood had provided Amazon with £430,000 of funding. She said: “Amazon provides more than 2,000 jobs in its Scottish locations making a significant contribution to local economies.

“This government is focused on jobs and growth and we would hope all parties support that. Attracting inward investment is a key part of the Scottish Government’s economic strategy and can help us build sustainable economic growth for the benefit of the people of Scotland.

“Over the past 12 months, the Scottish Government has provided Amazon with close to £430,000 in financial assistance. Investors are attracted to Scotland by the quality of our labour force, our research base, access to markets and value for money.”

John Hemming, a Liberal Democrat MP, said the figures showed the inadequacy of existing rules to tackle the problem of profit shifting by major corporations.

“The government clearly needs to do a detailed study on how to handle the tax implications of e-commerce,” he said.

An online petition set up by local booksellers which demands the government “stop Amazon’s tax dodge now” has since attracted almost than 170,000 signatures.

Chancellor George Osborne, who spoke at a meeting of European Union finance ministers in Brussels earlier this week, has claimed he is making tax dodgers – both corporate and personal – a “priority”.

However, in March, a House of Lords committee claimed his general anti-abuse rule (Gaar) had left voters under the disillusion that corporate giants would be “slapped with massive bills”.

Automatic exchange of tax information, and possibly public registers of company ownership are two of the main gains being sought by Prime Minister David Cameron at the G8 summit in June.

Anna Walker, spokeswoman for UKUncut, which campaigns against government austerity cuts, said: “This is yet another example of business using tax havens such as Luxembourg to make sure that they do not pay the full amount of tax in the UK. This is absolutely outrageous.”

A spokesman for Amazon, which earlier this week suffered a mass walkout by hundreds of German workers over demands for higher pay, said: “Amazon pays all applicable taxes in every jurisdiction that it operates within. 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.”

Like other businesses, Amazon also pays National Insurance on employee wages and collects VAT for the government.

How do they do it?

Amazon.co.uk was able to report a small corporate income tax bill because all sales to British customers are routed through a Luxembourg affiliate, Amazon EU Sarl, which employs around 500 staff.

The British subsidiary is deemed, for tax purposes, to be a service provider to the Luxembourg unit.

It is funded by fees it receives from Amazon EU and since these only just cover operating costs, little is left over for HMRC to tax.

In turn, Amazon EU pays little tax in Luxembourg because it pays hundreds of millions of euros each year in fees to a tax exempt affiliate, also registered in Luxembourg.