Last updated: May 2013
Tax avoidance by e-reader and bookshop companies
We have given six companies in our product reports on bookshops and e-readers a worst rating for tax avoidance while five received a middle rating. Luckily there are still a host of companies that score a best mark and provide a more ethical alternative to Amazon.
Below is an infographic which shows the companies in both the e-reader and online book markets which are suspected of using tax avoidance strategies.
The bad news
As you can see from the infographic Alibris, Amazon, Google, Kobo, Uncuva (Tesco) and Waterstones all received our worst rating for likely involvement in tax avoidance strategies.
Tesco had a range of high risk subsidiaries in tax havens including holding companies in Jersey, Guernsey and Luxembourg.
Google’s UK unit was reported by the Telegraph in 2012 as having just paid £6m corporation tax in 2011 on turnover of £395m. 
Waterstones whose parent company was located in Bermuda, also received a worst rating. The company had issued a statement on its website stating that ‘As a UK registered and domiciled business, Waterstones fulfils all its tax obligations. This will include both the payment and reporting of all necessary UK taxes, as set out under UK tax legislation.’
However, Ethical Consumer felt that the statement failed to clarify why its parent company was registered in a well-known tax haven and therefore concluded that it was likely to be for tax avoidance purposes.
Alibris was another company owned by a private equity firm which had a company structure that provided strong evidence of a likely tax avoidance strategy. It owned companies listed mostly in the Cayman Islands and Bermuda.
Rakuten, the parent company of Kobo, also received a worst rating for tax avoidance strategies due to its Play Holdings Ltd subsidiary being registered in Jersey, and a capital management subsidiary registered in the Cayman Islands.
Apple received Ethical Consumer’s middle rating despite a BBC report in November 2012 that stated the company had paid less than 2% corporation tax on its profits outside the US. A figure which was taken from its filings with US regulators. Apple channels much of its business in Europe through a subsidiary in the Republic of Ireland, which has lower corporation tax (12.5%) than Britain (24%). 
Sony, Nook (Barnes and Noble), WH Smith, and Binatone received Ethical Consumer’s middle rating. All had subsidiaries in tax havens which were considered to be at lower risk of being used for tax avoidance strategies. However due to a lack of country-by-country reporting it is hard to tell whether a company is paying the correct tax or not. Multinational companies often shift profits between subsidiaries in different jurisdictions, allowing them to dump their costs into high-tax jurisdictions which can be deducted against tax, and shift their profits to tax havens, where they pay little or no tax.
The good news
The good news is that there are many alternatives to companies which are involved in tax avoidance.
Companies such as Ebooks.com offer viable alternatives to Amazon, Tesco and Google. Also online, the Guardian Bookshop offers a range of books supplied by Bertrams – a company scoring best in our rating.
On the high-street, Blackwells bookshops offer a range of fiction books and textbooks for students. The company also offers to buy-back books and sells second hand books for cash strapped students.
For e-readers there are several companies which do not appear to be engaged in tax avoidance strategies. These are Archos, Bebook, Bookeen, Boox, Elonex, Gobook, Iriver, Libre, Pixelarand Pocketbook.
While many of the companies listed in this report are unlikely to be involved in tax avoidance schemes, the squeeze on profits from Amazon and Google is impacting on how much tax is being paid by everyone in the bookshop sector, as many are failing to make much of a taxable profit.
It could be argued that Amazon’s tax aviodance is therefore having a double impact on tax revenue. The need to boycott Amazon and demand they pay their fair share of tax is given greater impetus.