‘There has to be a level playing field so that… Amazon cannot undercut domestic booksellers by using the tax advantage of booking in Luxembourg a sale to a UK customer that is fulfilled from a UK warehouse.’ I wrote that five years ago: since then, no government anywhere has effectively addressed the issue of global tax minimisation by online giants and multinational consumer brands. As Amazon’s merchandise range has expanded, it has gone on undercutting not just our last surviving bookshops but every other business-rate-burdened local retailer. Meanwhile, as its market capitalisation soars towards $900 billion, its founder Jeff Bezos has become the richest man ever, with a $150 billion hoard.
And now we learn that Amazon paid just £1.7 million in UK corporation tax last year on profits of £72 million in its UK subsidiary; the tax take would have been £4.7 million before the effect of payments into a staff share scheme, but that’s still only a third of what a conventional corporate tax bill might have looked like, and no one seems to know how the trick is done. What’s more, the declared profit derived from just £2 billion of sales through the UK subsidiary — while another £7 billion of sales to UK customers was booked in Luxembourg.
It’s impossible to work out the real profitability of Amazon’s UK business, or the ‘fair’ tax charge that might have applied if it was all visibly onshore. Tax and accounting rules for multinationals are so malleable, and politicians so desperate to encourage inward investment, that Amazon can continue to declare, unchallenged, ‘we pay all the taxes that are required in every country where we operate’. In Luxembourg in particular it benefits (as McDonald’s and others of that ilk have done) from a ‘sweetheart’ deal struck with Jean-Claude Juncker when, as prime minister there before he became European Commission president, he did his utmost to block EU-wide anti-avoidance measures that might have disadvantaged his tiny tax-haven enclave.
So it’s no good trying to shame companies such as Amazon into behaving like good citizens where they operate, because they actually see themselves as citizens of cyberspace whose duty is to maximise shareholder value by exploiting conflicting national tax codes.
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