The Booksellers Association (BA) has called for the UK’s tax system to be overhauled after it emerged that Amazon UK Services corporation tax bill halved last year despite its sales soaring past £1bn for the first time.
Giles Clifton, head of corporate affairs at the BA, said that the UK’s current taxation system was “out of date” and “discredited” and was heavily weighted against brick and mortar retailers, which he said was “simply wrong”.
He was speaking after results filed on Companies House on Wednesday and first reported by The Bookseller revealed turnover at Amazon's UK Services arm soared past £1bn for the first time in 2016 to £1.5bn, but its corporation tax payments halved to £7.4m.
Corporation tax is paid on the profits a company makes and Amazon’s operating profit tumbled by over 50% in 2016 to £25.6m after it heavily invested in its warehouses and distribution network throughout last year.
At the same time, the firm's accounts showed it received £1.1m in government grants, which it uses for warehouses. In total it received £1.3m credit from the UK authorities, which it will be able to deduct from future tax bills.
Amazon UK Services arm relates to the company’s fulfilment operation and distribution centres in Britain. Its retail sales are filed in the US and show the company racked up sales of $9.5bn (£7.3bn) in the UK last year, up 5.6% year-on-year. Since May 2015, Amazon said it has begun booking its retail sales through HMRC and paying tax after the introduction of the diverted profits tax (also known as the Google tax) but under the current UK law HMRC is not able to reveal how much the company pays.
Clifton said: “These latest figures from Amazon confirm what has become an annual event, an annual ground hog day. This is, quite simply, that Amazon is able to pay very low rates of tax in the UK under the present system. This gives Amazon – possessed of a huge market share and all the associated commercial bargaining power that goes with it – a further, substantial, advantage over its competitors in the UK book trade.”
He went on to renew the BA’s calls for the business rates system to be overhauled, drawing the comparison that Amazon Services' accounts suggest brick and mortar booksellers are paying £2.41 in business rates for every £1 paid by Amazon in corporation tax.
“This is an annual reminder that the current system of taxation is out of date and discredited,” Clifton said. “It is simply wrong that the current system is so heavily weighted against bricks and mortar retailers, who are paying £2.41 in business rates for every £1 paid in corporation tax. We already know that the Waterstone’s on Bedford high street is paying seventeen times more in business rates than Amazon. This deeply unfair system must end."
He added that Amazon receiving government grants further pointed to the inherent “absurdity” in the system, in view of Amazon’s minimal tax contribution to the UK Treasury “and helps illustrate why the present system is unfair and demonstrates the need to reform it”.
“Booksellers should not be unfairly treated by a tax system which penalises bricks and mortar businesses against multi-national, online competition,” he said.
Amazon’s latest results have also drawn ire from politicians.
Tory campaigner Charlie Elphicke told The Sun that Amazon's tax contribution was “peanuts". "People will say it’s high time Amazon paid their fair share,” he said. Meanwhile Labour’s Margaret Hodge, who has been boycotting Amazon over its tax practices, told the newspaper: “It remains outrageous that Amazon are so blasé that they can ignore all the anger that their failure to pay fair tax in this country.”
However, Amazon argues it pays all the tax it is required to by UK law.
A spokesperson said: “We pay all taxes required in the UK and every country where we operate. Corporation tax is based on profits, not revenues, and our profits have remained low given retail is a highly-competitive, low margin business and our continued heavy investment."
The company added that it had invested over £6.4 billion in the UK since 2010 including opening a new head office in London and development centres in Cambridge and London this year, and creating 5,000 permanent jobs across the country in research and development, our head office, customer service and fulfilment centres, to bring its total workforce to 24,000.