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Worst Ethical Consumer ranking for likely use of tax avoidance strategies

In June 2017 Ethical Consumer viewed Amazon's 2016 10-K filing for the US Securities and Exchange Commission. This showed that the company was incorporated in Delaware, considered a tax haven by Ethical Consumer at the time of writing. The filing exhibit 21.1 also included a list of eleven subsidiaries all of which were based in jurisdictions on Ethical Consumer's list of tax havens at the time of writing, including Amazon Europe Holding Technologies SCS, located in Luxembourg. Amazon recieved Ethical Consumer's worst ranking for likely use of tax avoidance strategies. Inc Corporate (30 June 2017)

Fortune 500 company accused of avoiding tax

The Institute on Taxation and Economic Policy (ITEP) published a report in March 2017: The 35 Percent Corporate Tax Myth; Corporate Tax Avoidance by Fortune 500 Companies, 2008 to 2015. The report documented just how successful many Fortune 500 corporations had been at using loopholes and special breaks over the past eight years, in order to have paid less than the 35% federal income tax on their U.S. profits - with many having paid nothing at all. ITEP stated: "As lawmakers look to reform the corporate tax code, this report shows that the focus of any overhaul should be on closing loopholes rather than on cutting tax rates." The report included only corporations which had been consistently profitable every year between 2008 to 2015. By leaving out corporations that had losses in any one year (which means they wouldn’t have paid any tax), the report provides a straightforward picture of average effective tax rates paid by the 258 biggest and most consistently profitable U.S. companies. The report found that one hundred of the 258 companies (39 percent of them) paid zero or less in federal income taxes in at least one year from 2008 to 2015. The sectors with the lowest effective corporate tax rates over the eight-year period were Utilities, Gas and Electric (3.1%), Industrial Machinery (11.4%), Telecommunications (11.5%), Oil, Gas, and Pipelines (11.6%), and Internet Services and Retailing (15.6%). Each of these industries paid, as a group, less than half the statutory 35 percent tax rate over this eight-year period. Amazon was one of the companies in the report. Over the eight year period covered by the report, the company was found to have made US$6,237.5 millions profit, on which it paid US$674.5 m tax. This worked out at a rate of 10.8%.

The Institute on Taxation and Economic Policy (ITEP) 35 Percent Corporate Tax Myth; Corporate Tax (March 2017)

Excessive directors' pay

In June 2017 Ethical Consumer viewed Amazon's Def14A filing downloaded from the SEC website. It stated in 2016 that the following people got paid over £1 million in 2016: -Jeffrey M. Blackburn SVP, Business Development, $22,019,668; - Andrew R. Jassy, CEO Amazon Web Services, $35,431,144; - Diego Piacentini SVP, International Consumer Business, $23,585,138; - Jeffrey A. Wilke, CEO Worldwide Consumer, $32,958,114. Ethical Consumer deemed rumeration over £1 million to be excessive. Inc Corporate Communications:Amazon Def14A (May 2017)

Amazon investigated over VAT fraud

In the Guardian in December 2015 it reported that HMRC were investigating if Amazon could be made to pay for outstanding VAT bills owed by overseas traders using the online platforms. A Guardian investigation found that "hundreds of high-value gifts including Apple watches, iPads, Fitbits and Panasonic cameras are being sold on Amazon’s UK website without VAT being charged." According to the paper, record numbers of small overseas sellers who were not paying VAT had imported goods into Britain, with Amazon dispatching the stock from its UK warehouses. Many of these VAT-free sellers gave virtual office or residential addresses in China, Hong Kong and the USA. Prices available on were sometimes dramatically cheaper than those offered by high street retailers, which charge VAT. In other instances, small overseas sellers offer prices that match, or were close to, those available in stores, keeping the missing VAT. An iPad Air, sold by Apple and Argos for £319 (including VAT of £53.17), was offered on Amazon by a Chinese seller for £282. The Guardian contacted the seller asking if it could provide a VAT receipt. The seller responded: "We are sorry that we are not VAT registered." The Guardian ordered goods worth £1818.20 and paid no VAT on the bill. VAT on most goods was charged at 20% in the UK. A Treasury spokesman told the House of Lords that HMRC had set up a taskforce to investigate VAT evasion by overseas internet sellers. Urgent meetings with senior figures at Amazon and eBay took place last month. The firms have insisted responsibility for charging the correct VAT lies with sellers using their sites. Amazon have said they help sellers understand their tax obligations, but it had no duty to police compliance. Amazon also said it could not be held liable in cases of evasion. Amazon declined to answer the Guardian's questions regarding potential VAT abuse by overseas sellers using its website and warehouses. In a statement, it said: "Marketplace sellers are independent businesses responsible for complying with their own VAT obligations. We do offer tools and information to assist sellers with their compliance, but we don’t have the authority to review their tax affairs. Naturally, we cooperate with HMRC as we are required to by law."

Guardian:30 December 2015

Tax deal with Luxembourg probed by EU

According to an article published on the New York Times website on 16 January 2015, the EU had found that Amazon's tax arrangements in Luxembourg probably constituted unlawful "state aid". The European Commission said that its "preliminary view is that the tax ruling... by Luxembourg in favour of Amazon constitutes state aid." This was essentially done by capping the amount of tax that Amazon had to pay to Luxembourg authorities by capping royalty payments to other Luxembourg subsidiaries. According to the Financial Times in the commission’s view, Luxembourg deviated from international standards by offering Amazon a cap on the amount of corporation tax it would need to pay in any given year. This cap was less than 1 per cent — approximately €75m in 2013 on Amazon operating company turnover of around €13.6bn. The ruling regarded payments of royalties from one of Amazon's Luxembourg subsidiaries to another of the company's Luxembourg subsidiaries. The European Commission began an investigation into Amazon's tax arrangements in Luxembourg last year after activists and UK MPs questioned the relationship between its various subsidiary companies within Luxembourg and its subsidiaries in other parts of the EU including Britain. The Commission found that Luxembourg did not properly look into Amazon's "transfer pricing" proposals (how royalty payments would be moved between different Amazon subsidiaries) and whether the country properly assessed the proposed tax regime. According to the document released by the European Commission, Amazon gave Luxembourg no explanation of the intellectual property for which the royalty was paid. The Commission also stated that the ruling was issued within 11 working days of the first Amazon request, “a very short period of time had a transfer pricing report been submitted and assessed in this case”. Questions had also been raised over the size of payments between Amazon subsidiaries and how these were calculated. With the Commission stating that, "Amazon has a financial incentive to exaggerate the amount of the royalty" between its Luxembourg head office company and an Amazon firm that holds shares in the head office company. "If the royalty is exaggerated, it would unduly reduce the tax paid by Amazon in Luxembourg by shifting profits to an untaxed entity from the perspective of corporate taxation," the European Commission said. In addition “The transfer pricing arrangement put in place by Amazon and accepted by the contested tax ruling effectively contains a cap on a remuneration which seems too low,” the European Commission said. However, Amazon said it "has received no special tax treatment from Luxembourg". "We are subject to the same tax laws as other companies operating here [in Luxembourg]," it said. The Luxembourg finance ministry said: "Luxembourg is confident that the state aid allegations in this case are without merit and will be able to convince the Commission of the legitimacy of the anticipatory decision in question and that no competitive advantage was granted," it said. The EU reminded Luxembourg and Amazon that "all unlawful [monies] may be recovered from the recipient."

New York Times:Amazon’s Tax Deal With Luxembourg May Break Rules, E.U. Regulator Says (16 January 2015)

Avoidance of UK tax in 2013

The Sunday Mirror reported on 31 January 2015 that six of the world’s biggest companies paid just 0.3 per cent of their UK earnings in corporation tax last year. The paper examined the UK accounts of six firms including Amazon and found that between them they had reported a total of £2.6billion of revenue in the last year but many more billions of pounds of sales from the UK were recorded every year by subsidiary companies – often located in tax havens like Luxembourg and Switzerland. It reported that Amazon's British firm Limited paid £4.2million in corporation tax in 2013 despite earning an estimated £4.2billion from the UK. The UK firm reported £449million in turnover because customers bought goods from Luxembourg- based Amazon EU Sarl, and the UK division was little more than a delivery company. Amazon faced a European Commission probe into a tax deal reportedly struck in Luxembourg. Amazon said: “Amazon pays all applicable taxes in every jurisdiction it operates within. We have a single European HQ in Luxembourg.”

Mirror & Sunday Mirror (The):Six firms including Google and Facebook made £14BILLION last year but paid just 0.3% UK tax (31 Jan

Use of tax havens by Fortune 500 companies

A report by Citizens for Tax Justice on 6 October 2015 criticized US tax policy on large multinational corporations. Many multinational corporations used accounting tricks to pretend for that a substantial portion of their profits were generated in offshore tax havens, countries with minimal or no taxes where a company’s presence could be as little as a mailbox. The study examined the use of tax havens by Fortune 500 companies in 2014. It revealed that tax haven use was ubiquitous among America’s largest companies and that a narrow set of companies benefited disproportionately. Amongst these companies was found to maintain two subsidiaries in Luxembourg - considered to be a tax haven. The amount held offshore was $2.5 billion. Neither the overall rate of the tax paid on this overseas cash, nor any estimate of the US tax avoided, were disclosed.

Citizens for Tax Justice:Offshore Shell Games 2015 (5 October 2015)

Facing EU investigation for Luxembourg tax fraud

In an article dated 13 November 2015, Computer Business Review reported that Amazon was among a number of large corporates to be investigated by EU regulators over its allegedly paying insufficient taxes. This began after documents were exposed by a group of investigative journalists which contained evidence that the company had made secret fiscal deals with Luxembourg which enabled it to pay low taxes.

Computer Business Review parliament to grill US tech giants on Luxenbourg tax fraud (13 November 2015)

US tax rate 2008-2012

According to the Citizens for Tax Justice's Corporate Tax Explorer database, between 2008-2012 Amazon paid an effective tax rate of just 9% on a total of $3,367 million of US profit. The US tax rate is 35%. In 2008-10, despite making a profit of $1,831.5 million, their effective tax rate for the period was 7.9%.

Citizens for Tax Justice:Corporate Tax Dodgers (15 September 2014)

Avoidance of UK tax in 2014

According to an article in the Guardian in June 2015, Amazon's sales to UK internet customers boomed in 2014, increasing more than 14% to £5.3bn. But these sales were routed through its Luxembourg unit, meaning that the British tax man did not see a slice. In the UK the company paid just £11.9mn in corporation tax. According to the Guardian, the company's 2014 accounts claimed that its British subsidiary did not sell to British customers, rather it provided services to its Luxembourg subsidiary, which made the sales. This was despite the number of staff employed in the company's British warehouses increasing from 5,912 in 2013 to 7,722 in 2014. In May 2014 the company apparently voluntarily decided to end this arrangement, claiming that it had started to book retail sales through its UK branch. But campaigners, including Ethical Consumer remained sceptical.

Guardian, The:Amazon's UK business paid just £11.9m in tax last year (24 June 2015)