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Tax avoidance and retailers

Amazon is notorious for its tax avoidance practices, but it’s not the only retailer dodging their responsibilities. 

In this article we look at tax avoidance amongst large retailers, and ask what alternatives there are.

From clothes stores to online sales platforms, the retail sector is full of companies avoiding paying their fair share of tax.

Every year, corporate tax dodging costs poor countries at least $100 billion. That’s $100 billion that could otherwise have been spent on essential services, like healthcare or education.

What is tax avoidance?

Companies (and individuals) use loopholes in the law to shift their money around in order to pay a lower rate of tax. It is essentially a way to avoid paying money into the public purse.

For example, Amazon has shunted much of its UK income to its subsidiary in Luxembourg, where tax rates are particularly low. By transferring profits to a ‘loss-making’ subsidiary, the company is “not only not paying 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 from the Fair Tax Mark. Amazon’s losses in Luxembourg are partly due to discounts, the cost of advertising and the cost of hiring new employees.

While tax avoidance is legal, it involves using the law in a way that was never intended. (It is different to tax evasion, which involves lying about your accounts, and is illegal.)

Read our article ‘What is tax avoidance?’ and find out which countries are on our list of tax havens.

Why does tax avoidance by retailers matter?

Tax avoidance is costing the UK millions each year. In 2022, Ethical Consumer calculated that Amazon’s tax avoidance alone likely cost the UK public purse £500 million in 2021. That’s equivalent to a £500 payment to the poorest one million UK households to help with rising fuel bills.

With costs of living rising, and public spending being slashed, tax avoidance further deprives our public services.

But it’s poor countries that feel the biggest effects. Each year, the poorest countries lose the most from tax avoidance in proportion to their GDP. In Gambia in 2020, tax losses are estimated to have outstripped all tax collected.

The impact on these countries is massive. At the height of the COVID19 pandemic, Gambia was losing an estimated thirteen times more from tax avoidance than it was spending on its healthcare.

Which retailers are avoiding paying tax?

Globally, the gap between the tax that Amazon declares and what it is thought to actually pay is $6 billion. Ethical Consumer has been calling for a boycott of Amazon over its appalling tax practices since 2012.

Unfortunately, Amazon is not the only company that appears to be avoiding tax in this market. Ethical Consumer rates and ranks all brands in its shopping guides on likely use of tax avoidance strategies.

Alongside Amazon, eBay also receives a low Ethical Consumer rating.

Tesco, Morrisons, Asda and Lidl also all perform badly in the supermarkets guide.

And almost half of the companies in our bookshops guide got low ratings.

For companies in other sectors see our list of brands which got the worst ratings.

Case Study: Asda receives a low rating for tax conduct.

In January 2022 Ethical Consumer viewed Asda Stores Limited's most recent company accounts (December 2020).

These stated that Asda's ultimate parent company was “Bellis Holdco Limited which is jointly controlled by the Issa brothers and TDR Capital LLP." Bellis Holdco Limited was incorporated in tax haven Jersey, despite the majority of Asda's operations being located in the UK.

According to the D&B Hoovers corporate database, Asda also had the following finance subsidiary, considered a high-risk company type for likely use of tax avoidance:

  • Asda Finance Limited in Jersey

Jersey was on Ethical Consumer's list of tax havens at the time of writing.

Ethical Consumer reviewed the Asda Group tax strategy statement from December 2021. However, this was not considered to be adequate, as it did not appear that the company had provided a clear public tax statement confirming that it was this company’s policy not to engage in tax avoidance activity nor to use tax havens for tax avoidance purposes, nor did the company provide a narrative explanation for what each group entity located in a tax haven is for, and how it is not being used for purposes of tax minimisation. No country by country reporting was identified.

Overall, Asda Group Ltd scored very low in the Tax Conduct category.

Logo with heart and words Fair Tax accredited

What can consumers do about tax avoidance?

Consumers can support companies which do pay their fair share of tax, and avoid those which don't. And tell the companies why you're doing this!

Consumers can also join our boycott Amazon campaign - see the box below.

Look for the Fair Tax Mark

A growing number of companies are accredited by the Fair Tax Foundation – an initiative that Ethical Consumer helped to start in 2014 to recognise companies that are paying into the public purse.

Accredited brands range from FTSE100 businesses to small local companies, and includes Ethical Consumer!

The likes of Co-op Food, Unity Bank, building societies (Leeds, Coventry and Ecology), Revolver coffee and tea, Suma, Friendly Soap, LUSH and Timpson are also on the list of accredited organisations.

Which retailers are paying their tax?

Finding retailers paying their tax can be a challenge. Companies are notoriously opaque about their tax practices, and even where the information is available working out who is paying what would mean picking over some very confusing accounting.

In our online retailers guide companies including Ethical Shop, Shared Earth, Traidcraft and all receive high ratings for tax conduct.

Of the high street supermarkets, Coop, M&S and Waitrose stand out for receiving high ratings for tax conduct. Waitrose had a strong policy against tax avoidance, and M&S explained to Ethical Consumer how it was using its subsidiaries in tax havens for legitimate trading purposes.

When it comes to tax conduct among high street clothes shops, Patagonia and Reformation are amongst the best scoring.

Ethical Consumer’s tax avoidance rating

Ethical Consumer has rated over 1000 brands on their approach to tax avoidance.

We look at whether they own companies in tax havens, and if so whether they’re high risk for tax avoidance purposes. We consider what policies they’re publishing on tax avoidance and whether they’re providing information to show that they’re paying a fair amount. And we look for reports from NGO or media that the company has avoided tax in the past.

Amazon and tax avoidance

Amazon scores a low rating for tax conduct. If you feel they should be paying their fair share, read about our Boycott Amazon campaign below and the actions you can take.

Boycott Amazon

Amazon is a household name – including for tax avoidance. By boycotting Amazon, we can not only pressure the company to change its practices but send out a strong message that we do not accept tax avoidance.

Our boycott targets Amazon because of its long running record of malpractice in this area, and its market dominance. If we tackle Amazon’s tax avoidance, we can begin to address poor tax practice in markets and by corporations around the world.