British customers account for nearly ten per cent of the company’s global turnover, but these sales didn’t go through its UK books until recently.
Amazon announced that, from 1 May, it would be booking UK sales through a British subsidiary after years of using one in Luxembourg – where it enjoys low tax rates. The company had been criticised for this in the past – other global giants from Apple to Starbucks have also come under fire for their low tax payments in European countries where they still enjoy high levels of business.
According to the filings, the company saw sales rise 14 per cent in the UK for last year, but its Amazon.co.uk subsidiary recorded a modest profit of £34.4m as the UK sales were taken through the group’s Luxembourg arm – Amazon EU Sarl.
Current rules enable companies to shift profits across borders to make best use of tax rates which are lower than in the country they made the majority of their profits. The OECD has said this has meant some multinationals end up paying five per cent in corporate taxes, while many smaller businesses are paying up to 30 per cent.
Chancellor George Osborne is currently pushing ahead with a “diverted-profits tax”, more commonly referred to as the “Google tax”, in an attempt to discourage multinationals shifting profits out of the UK as a means to cutting their tax bills. He hopes the new tax measures will raise £3.1bn over the next five years.
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Jonathan Isaby, CEO of the TaxPayers’ Alliance, said: “You can understand people’s anger at organisations like Amazon perceived not to be paying their fair share, but our frustration should be focused at the politicians and bureaucrats who have created our ludicrously complicated tax code.”
He added that it was “so riddled with loopholes and exemptions that those who can afford to find them will be able to”.
“It’s time for a radical simplification of the tax code to make it easier to administer, to make the line between ‘avoidance’ and ‘evasion’ more obvious, and with fairer and lower taxes across the board,” Isaby said.
Amazon is likely to be under further scrutiny as its UK business continues to grow rapidly.
The online retailer has made its intentions clear to avoid further upsetting bricks and mortars stores, by focusing on the logistics business launched in 2013 to provide same-day delivery.
Delivery has become a highly-competitive area among ecommerce providers as each look to outdo one another, while attempting to take market share from physical stores.
Amazon’s growth currently shows little signs of slowing – it has reached 10,000 employees in the UK for the first time and will be charging additional retailers to store stock in its warehouses.
However, the changes Amazon has made to its structure will make it easier for HM Revenue & Customs to tax the profits associated with sales to UK customers, which had previously been predominantly out of reach.
In terms of the company’s aims to improve delivery – the company is trying to convince more businesses selling through the site to pay Amazon to take over the delivery portion of the service, as well as customer service.
It says this should help make exporting to foreign markets easier and cheaper for businesses, reporting that £1bn in sales from its UK marketplace came from overseas purchases in 2014. Businesses using this so-called “fulfilment” service include Ann Summers and the Early Learning Centre.
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