Amazon’s UK tax up just 3% despite surge in profits

Amazon announced at the beginning of September that its key UK business paid £14.46million in corporation tax in 2019, just a 3% increase since 2018, despite its pre-tax profits growing by more than 35% during the same period.

The company is accused of avoiding tax in the UK by registering its sales from the country in Luxembourg, a known tax haven. Amazon EU, the company’s Luxembourg subsidiary is loss-making, not only meaning that it does not pay tax, but that it “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. "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.” 

The online retailer - which has a market value of over $1 trillion - has also repeatedly been accused of opaque tax practices. It does not publish details of most of its UK profits or tax payments.

Margaret Hodge added, “The only solution is more transparency for corporate taxation. The government must act urgently to implement public country-by-country tax reporting so that we can see where companies are making their profits and if they are paying fair taxes."

Ongoing tax avoidance

Amazon has long been criticised for its tax avoidance practices, despite committing in May 2015 to beginning to pay its fair share of taxes. 

In 2017, Amazon’s UK tax bill fell despite tripling profits. In 2018, the company’s tax contribution almost tripled; yet campaigners continued to accuse it of clear “underpayment” compared to its profit rates. In June we estimated that the UK had lost over £1 billion in taxes from the profit shifting of Google, Facebook, Microsoft, Apple and Amazon in 2017.

It is not only in the UK that Amazon’s tax avoidance has a high cost. The company - which is part owned and was founded by Jeff Bezos, the richest man in the world - has also been repeatedly criticised in America for its tax avoidance.

Throughout 2017 and 2018, the company encouraged a bidding war between US cities seeking to persuade the company to locate their second headquarters there. The company made it clear that tax relief sweetheart deals should be included in the packages.

Coronavirus and fair taxation

The announcement of the company’s 2019 tax payments comes at a time when the importance of fair taxation is increasingly apparent. Whilst public money is more vital than ever, high street and local businesses are also facing challenges from the coronavirus crisis like never before - and cannot afford to be undercut by Amazon’s tax avoidance. 

Meanwhile, the pandemic has caused a surge in Amazon’s sales. Amazon customers were reported to have spent $11,000 a second in the early weeks of the lockdown in April. Margaret Hodge stated: “While high-street businesses struggle and regular taxpayers pay their fair share, it's deplorable that the wealthiest corporations in the world will move heaven and earth to avoid paying their taxes,”

In August, Amazon announced that it would be passing the cost of the digital services tax on to the small businesses and others that sell through its site.

The digital services tax is designed to ensure that online search engines, social media services and online marketplaces are paying their fair share of tax. It looks at sales made in a country, rather than profits as with corporation tax, which can easily be registered elsewhere.

Amazon increased its UK fees for sellers by 2%, after the government introduced the 2% tax at the beginning of September.

Ethical Consumer continues to call for a boycott of Amazon over its tax avoidance.

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