In 2020, Amazon announced that its key UK business paid just £14.46 million in tax in 2019 - a 3% increase from the previous year, despite pre-tax profits growing by more than 35%.
We have estimated that in 2017 Amazon’s tax avoidance from profit shifting alone cost the UK £52million.
Amazon promised in 2015 that it would begin to pay a fairer rate of tax. Yet the online giant - which has a market value of over $1 trillion - has refused to keep its promise, at a time when public finances are more vital than ever before.
So, where does Amazon’s money go?
Tax avoidance often relies on shuffling money between countries. In 2015, Amazon said that it would start to book retail sales made in the UK through its UK subsidiary, meaning that it would pay tax in proportion to the sales made in the country. Yet, in 2020, the company was again accused of registering its UK sales in Luxembourg, known to be a tax haven.
In fact, Amazon’s Luxembourg subsidiary currently makes a loss, meaning that it not only doesn’t pay 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,” according to Paul Monaghan, CEO of the Fair Tax Mark.
Indeed, Amazon doesn’t just shift money in space - it also shifts it through time. Amazon invests everything into dominating the market, thereby monopolising industries while keeping its profits low. This way, it can defer paying taxes until another time.
Besides the monopoly issues, this poses massive problems for countries in need of taxes now: even if Amazon were to pay huge amounts somewhere down the line, taxes are needed to fund vital public services now.
Paul Monaghan, CEO of Fair Tax Mark:
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. Contrived financial arrangements lie at the heart of Amazon’s success.
Amazon doesn’t even publish details of most of its UK profits or tax payments. The conglomerate is concealing its tax practices - making them all the harder to address.