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Amazon’s corporation tax slammed by HOC committee

Amazon was yesterday (12th November) accused by the House of Commons Public Accounts Committee of putting UK booksellers out of business by using corporation tax avoidance strategies which made it impossible for them to compete.

Meanwhile Amazon’s director of public policy Andrew Cecil (pictured) was told that some of his answers to the committee’s inquiry into the company’s corporation tax were “pathetic”, “insulting to everyone’s intelligence” and “not acceptable”.  An infuriated Margaret Hodge MP, chair of the committee, told Cecil that she would require a meeting with a different Amazon representative capable of answering the committee’s questions, after failing to get the information asked for on the company’s structure and its sales figures in the UK.

The HOC committee grilled representatives of Amazon, Google and Starbucks about the levels of corporation tax paid by the multinational businesses in the UK. Cecil said Amazon operates a single European company, Luxembourg-based Amazon EU S.a.r.L, with Amazon.co.uk operating just as a service company. Cecil confirmed that the UK company “does not own the inventory”, the books that it sells. Amazon.co.uk in 2011 had revenues of £207m, which it derived from providing services in the UK for Amazon Europe companies, with an after tax profit of £1.2m and a tax expense of £1.8m. Europe-wide revenues for 2011 were €9.1bn, with a profit after tax of €20m.

Hodge asked Cecil what proportion of Amazon’s European figures were sales into the UK, but to the committee’s ire Cecil replied: “We’ve never broken out figures on a website basis. Those are numbers we’ve never disclosed publicly. I’m very happy should the committee wish to come back and see if we can disclose them privately.” He also said he did not know who owned the holding company which owns Amazon EU S.a.r.L in Luxembourg, prompting further anger from the committee.

Several committee members highlighted the fact that Amazon.co.uk’s books, staff payroll and customers are all based in the UK, despite the claim that it is purely a “service” facility. While Amazon EU S.a.r.L has over 500 members of staff, there are over 15,000 staff in the UK. Hodge argued: “Your entire economic activity is here in the UK . . . yet you pay no tax here and that really riles us.” When Cecil responded: “We do pay corporation tax,” Hodge called it “a tiny bit in relation to your sales”.

Hodge told Cecil that Amazon was putting local booksellers out of business because its tax avoidance was making it impossible for them to compete. She also said: “You depend on the services that come out of the tax you pay, the ability to get your goods around on the roads . . . you’re not putting enough tax into our economy.” Cecil replied: “I’d like to refute that we’re putting booksellers out of business. What were seeing is that the internet retail industry is bringing huge benefits to consumers across Europe in terms of price, in terms of selection, in terms of convenience, and we are very much focused on continuing to invest to make sure consumers can benefit from internet retail.”

Further in the discussion, Matt Brittin, chief executive officer of Google UK, also defended the company’s level of corporation tax payment in the UK, saying the engineers who added value to Google’s offer were all based in California while the UK workers offered support services.

Troy Alstead, Starbucks Global chief financial officer meanwhile was told he was not believed when he said the chain did not make profits in Britain. He also declined to give the details of a favourable rate the company was granted from the Netherlands on a proportion of the profits transferred there in the form of intellectual property royalty on shops. He maintained Starbucks globally remained an "extremely high tax payer".

March 2012: Taxing Amazon: An investigation
 

Blog by The Great Tax Robbery author Richard Brooks: Fighting the Fat Cats

Comments: Scroll down for the latest comments and to have your say

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These are not the same people who saw no problem in the Amazon takeover of the Bookdepository are they? All of a sudden they're worried about diversity in the book trade? Don't make me laugh.

I don't think anyone on the committee mentioned diversity in the book trade or takeovers etc - they were asking questions about Amazon's tax arrangements.

There is an easy way to stop this nonsense of offshore companies not paying corporation tax. The answer is to charge those companies 20 percent TURNOVER TAX, which would be much greater than Corporation Tax's 20 per cent on profits. This would force them to create UK companies. However payments to parent companies in license fees would not be allow to be charged as inputs. Once Corporation Tax had been paid license fees could be applied and payments passed to parent companies abroad.

http://www.darcyblaze.com/

There already is a 20% turnover tax - it's called VAT. It's just that printed books are one of the few products not charged it. Making booksellers pay 20% of turnover would put the majority of booksellers in the UK out of business while Amazon would survive. Taxing turnover makes no sense and incentivises businesses to sell less so they can keep up margins. This in turn lowers the size of the UK's overall economy. For HMRC to raise more revenue they should lower corporation tax to a level that is more competitive with other nations (e.g. Ireland) so that companies are based here rather than overseas. I bet there is not a single one of Amazon's competitors who would like to see tax rates increased.

We are seeing two different structural shifts. The first is the shift to online, which will affect bricks and motar outlets unless they find ways to add value that online cannot– and no fiscal measures will change that shift. The second is the globalisation of money, inc tax. Open governments will need to structure themselves to be competitive if they want to remain open and benefit from that shift, much the same way that corporations and individuals have to remain competitive in a global marketplace.

In the age of the internet it is important that governments make sure there is a level playing field for all to operate within.

Robert Gottlieb
Chairman
Trident Media Group, LLC
See us on Facebook
www.tridentmediagroup.com

These are not the same people who saw no problem in the Amazon takeover of the Bookdepository are they? All of a sudden they're worried about diversity in the book trade? Don't make me laugh.

I don't think anyone on the committee mentioned diversity in the book trade or takeovers etc - they were asking questions about Amazon's tax arrangements.

There is an easy way to stop this nonsense of offshore companies not paying corporation tax. The answer is to charge those companies 20 percent TURNOVER TAX, which would be much greater than Corporation Tax's 20 per cent on profits. This would force them to create UK companies. However payments to parent companies in license fees would not be allow to be charged as inputs. Once Corporation Tax had been paid license fees could be applied and payments passed to parent companies abroad.

http://www.darcyblaze.com/

There already is a 20% turnover tax - it's called VAT. It's just that printed books are one of the few products not charged it. Making booksellers pay 20% of turnover would put the majority of booksellers in the UK out of business while Amazon would survive. Taxing turnover makes no sense and incentivises businesses to sell less so they can keep up margins. This in turn lowers the size of the UK's overall economy. For HMRC to raise more revenue they should lower corporation tax to a level that is more competitive with other nations (e.g. Ireland) so that companies are based here rather than overseas. I bet there is not a single one of Amazon's competitors who would like to see tax rates increased.

We are seeing two different structural shifts. The first is the shift to online, which will affect bricks and motar outlets unless they find ways to add value that online cannot– and no fiscal measures will change that shift. The second is the globalisation of money, inc tax. Open governments will need to structure themselves to be competitive if they want to remain open and benefit from that shift, much the same way that corporations and individuals have to remain competitive in a global marketplace.

In the age of the internet it is important that governments make sure there is a level playing field for all to operate within.

Robert Gottlieb
Chairman
Trident Media Group, LLC
See us on Facebook
www.tridentmediagroup.com