Slashdot Mirror
Amazon Pays No UK Income Tax, Under Investigation
New submitter artciousc writes with news that Amazon is dodging taxes in the UK. From the article: "Regulatory filings by parent company Amazon.com with the U.S. securities and exchange commission show the tax inquiry into the UK operation, which sells nearly one in four books sold in Britain, focuses on a period when ownership of the British business was transferred to a Luxembourg company."
Clever trick there: "The UK operation avoids tax as the ownership of the main Amazon.co.uk business was transferred to a Luxembourg company in 2006. The UK business is now owned by Amazon EU Sarl and the UK operation is classed only as an 'order fulfilment' business." The HMRC is investigating the legality.
It would be really difficult to structure a tax with the incidence falling solely on setups like the one Amazon has here, especially since the UK is part of the single market. This is most likely an issue that would have to be solved in the European Courts rather than by the UK government. I doubt that a few hundred million pounds in lost tax revenue would persuade the courts to force a major restructuring of trade. I am not expert on European jurisprudence though.
This is a legitimately complex issue of tax avoidance. Most of the time when people howl about corporations paying low effective tax rates it's because they don't realize all of the exemptions for favored industries (green and bio tech, aerospace, etc.) and absorbing losses create that outcome. Here we have a government stretched thin on revenues up against the framework of European economic integration.
I got a catholic block.
That's a very broad and legally vague concept.
If Amazon succeeds I expect many other international businesses to incorporate in the UK and attempt the same. In fact, they would be fools not to.
They learnt from the best: Topshop, Boots, HSBC (UK)...
I like paying taxes, with them I buy civilisation. However I am increasingly disgusted and angered by the wanton waste and inefficiency of government and public sector expenditure, especially at a time when new and higher taxes and rates are being levied against me. I have the right to demand value for money. I'm not sure how I can claim that right in the absence of political representation that's not invested to the back teeth in the public sector, so here we are I guess.
Of course, this is a glaring example of the failure of public companies: a lack of ethics. The root of all of our current economic and political problems is that public corporations have one interest: to make money in any way possible. There's no accountability in a public company, so running a public company ethically is out of the question. Of course, private companies can be run unethically as well, but there are a much smaller percentage of cutthroat, skating-on-the-edge-of-legal private companies, because in the case of private companies, there are repercussions to acting unethically or illegally.
I don't respond to AC's.
You certainly are not buying civilisation with taxes, if that were even remotely correct, we would have had 'civilisation' much earlier, and when I say: "civilisation", I am talking about the rapid progress that we have enjoyed since the beginning of the free market capitalist movement and industrialisation.
You could pay all the taxes you wished forever and ever, and you have, since before the pharaohs and on and on, but the only "civilisation" that you got was on par with those pyramids - the tombs for the Kings.
The real civilisation cannot be bought with taxes.
The real civilisation is created in the free market with people making everyday voluntary decisions on what to buy, making everyday voluntary decisions on what to work on, what to produce, how much to save, where to invest, etc.
None of what you believe to be 'civilisation' is actually that.
You can't handle the truth.
...taxes pay for things from which enable Amazon to have a business at all. Amazon can sell books to us because we're a reasonably literate population. They can get stuff distributed because we have a good road / rail network which is maintained. We have mechanisms in place to dispose of the masses of card packaging that Amazon use. We have employees who are kept reasonably healthy by the NHS (I'll understand if American readers are confused on this point - we have a decent health care system, America doesn't). All of these are the result, essentially, of taxpayer-funded state investment. So, by not paying taxes, Amazon are benefiting directly from such investment without contributing to it which, I would argue, is unfair and parasitical. I saw a great suggestion recently which was that if all of these anti-tax companies really wanted to put their money where their mouths are, they would set up shop in some crummy backward little country that doesn't bother with taxes and consequently has very little in the way of infrastructure, health, literacy etc. That's what small (or no) government gets you. If they decide they'd rather do business somewhere more advanced, they can damn well pay their fair share for the upkeep of the place.
If you don't _have_ to pay for something, why would you? Same with taxes - they know darned well they _should_ pay taxes, but with a little corporate slight of hand, they don't have to.
Is it just my observation, or are there way too many stupid people in the world?
The US has the same issues as the UK, which has the same issues as Europe. In the US, there was a report last year about how many companies moved their HQ to a PO box overseas, I believe mostly to Ireland. This was reportedly done to avoid paying US taxes. Of course even though this was shown to be true, the media later stated that it was anti-business hype and not a real problem. As of course the US goes further and further in to debt, public services are cut more and more, and the top 1% earners increase their wealth by incredible amounts each year.
Now we see similar stories from the UK, and right in the article it's seemingly excusing the businesses and vilify the protestors. (Sound like OWS?)
HSBC has joined the least desirable club in the business world. The bank yesterday became the latest target of a sudden surge in public fury over tax avoidance, as a guerrilla group of demonstrators under the elusive banner UK Uncut planned to occupy branches in London and Liverpool.
Baker says he is worried that the kind of street protests led by UK Uncut could "morph" into a more serious anti-business movement, though he admits some firms give the corporate world a bad name by over-exploiting loopholes.
So if you complain, you have to be anti-business.. you can't be right.
So the UK is as messed up as the US.. I'm not sure that makes me feel any better. Used to be, we were kind of the check and balance for each others corruption. The more of this kind of stuff I read about, the more I have to think that many of those conspiracy theories may be true.
-The wise argue that there are few absolutes, the fool argues that there are no probabilities.
HMRC: 'Evening, Executive!
Executive: (stiffly) Good evening.
HMRC: Is, uh,...Is your corporation a goer, eh? Know whatahmean, know whatahmean, nudge nudge, know whatahmean, say no more?
Executive: I, uh, I beg your pardon?
HMRC: Your, uh, your corporation, does it go, eh, does it go, eh?
Executive: (flustered) Well, it sometimes "goes", yes.
HMRC: Aaaaaaaah bet it does, I bet it does, say no more, say no more, knowwhatahmean, nudge nudge?
Executive: (confused) I'm afraid I don't quite follow you.
HMRC: Follow me. Follow me. That's good, that's good! A nod's as good as a wink to a blind bat!
Executive: Are you, uh,...are you selling something?
HMRC: SELLING! Very good, very good! Ay? Ay? Ay? (pause) Oooh! Ya wicked Ay! Wicked Ay! Oooh hooh! Say No MORE!
Executive: Well, I, uh....
HMRC: Is, your uh, is your company a sport, ay?
Executive: Um, it's profitable, yes!
HMRC: I bet it is, I bet it is!
Executive: As a matter of fact it's very profitable.
HMRC: 'Oo isn't? Likes profits, eh? Knew it would. Likes profits, eh? It's been around a bit, been around?
Executive: We have offshore accounts, yes. We moved the books to Luxembourg. (pause)
HMRC: SAY NO MORE!!
HMRC: Luxembourg, saynomore, saynomore, saynomore, Executive!
Executive: I wasn't going to!
HMRC: Oh! Well, never mind. Dib dib? Is your uh, is your corporation interested in....taxes, ay? "Taxes, ay", he asked him knowlingly?
Executive: Taxes?
HMRC: Snap snap, grin grin, wink wink, nudge nudge, say no more?
Executive: Corporate taxes, eh?
HMRC: They could be, they could be corporate. Domestic, you know, DOMESTIC corporate taxes?
Executive: No, no I'm afraid we don't pay any domestic taxes.
HMRC: Oh. (leeringly) Still, mooooooh, ay? Mwoohohohohoo, ay? Hohohohohoho, ay?
Executive: Look... are you insinuating something?
HMRC: Oh, no, no, no...yes.
Executive: Well?
HMRC: Well, you're a man of the world, Executive.
Executive: Yes...
HMRC: I mean, you've been around a bit, you know, like, you've, uh.... You've "done it"....
Executive: What do you mean?
HMRC: Well, I mean like,....you've SKIPPED on you taxes....
Executive: Yes....
HMRC: What's it like?
Is it just my observation, or are there way too many stupid people in the world?
OK. Reverse engineering a bit and filling in gaps in the media reporting, here is my educated analysis. If you, as a UK consumer, buy a book from amazon.co.uk, you are actually hitting servers in Luxembourg and buying the book from a Luxembourg company. Letâ(TM)s call it Amazon Lux. Current EU VAT rules mean that if you are downloading a e-book, Amazon Lux only charges the Luxembourg VAT rates on the sale and hands that VAT over to the Luxembourg government. (This rule is expected to change in two years.) If you are buying a dead tree version, then Amazon Lux has to charge UK VAT rates on the sale and hands that VAT over to the UK government.
There is a separate Amazon subsidiary in the UK, which operates a warehouse and shipping operation. Letâ(TM)s call it Amazon UK. Amazon Lux pays Amazon UK to operate the warehouse and perform the shipping. Typically this is done on a cost-plus basis, so Amazon UK is probably recovering its costs and getting a profit margin of 5-10%. Amazon UK will be paying UK income taxes on this small profit margin.
The tax treaty between the UK and Luxembourg states that if the only thing a Luxembourg company has in the UK is an agent that distributes stuff or stores stuff in a warehouse, then the UK government wonâ(TM)t treat that Luxembourg company as âoedoing business in the UKâ. Amazon Lux can take this position because they claim that the actual âoesaleâ event happened at the servers in Luxembourg when you made the final click on Amazon Luxâ(TM)s website. If this position is valid, then any profit on the sale above and beyond the cost-plus margin at Amazon UK is only taxable in Luxembourg. (And remember that the cost-plus margin is taxed at Amazon UK, not Amazon Lux â" the legal entity that actually entered into the transaction with the consumer.)
The complicating historical question is whether Amazon could move its historical business operation out of the UK to Luxembourg without paying an exit tax. EU law allows free movement of business and capital, but the issue of whether you can bail out of a country to a lower taxed country without any tax consequences is a bit of a muddle right now.
If you think deeply enough, you will have no single direction for your outrage.
The real civilisation cannot be bought with taxes.
The real civilisation is created in the free market with people making everyday voluntary decisions on what to buy, making everyday voluntary decisions on what to work on, what to produce, how much to save, where to invest, etc.
So where does public infrastructure fit into this scheme, especially the funding of it? How are the following funded: roads, sanitation systems, legal and judicial system, police, etc? Is that funding to be entirely voluntary as well?
Since you want to bring up pharoahs and kings, we might as well bring Romans into it. http://www.youtube.com/watch?v=ExWfh6sGyso Pretty much all of the things listed in this clip are things your government provides, not your free market, and they are paid for with tax money. The free market did not give you roads, sanitation, regulated utilities, education, the order of law, etc. It gave you wine though, you've got that at least. Although it'd be hard to produce or purchase the wine without the roads, sanitation, regulated utilities, education, order of law, etc.
About 50 people so far have given some variation of, "Well, if it's all legal then it must be ok." It's not troubling to anyone that they worked within the law to create a fiction, which is that they don't really operate or exist in the UK? It's wrong because it isn't true. Like in the USA we had Reagan redefine ketchup as a vegetable or something. I say this almost ever time this topic comes up, but it really seems to me that libertarians are nothing more than the useful idiots of big business. Sure, they like to think they support business in general, but it's always big business they rise to defend. As if Amazon needs defenders.
building multiple roads to allow a free competitive market to operate (and may the best road win) is an obvious nonsense.
- and yet it is done that way even now. There are plenty of ways getting from point A to point B, some ways are more expensive (have to pay a toll) and yet people prefer them, because those roads are mostly better and maybe more convenient, maybe there are fewer cops there, maybe there is less road maintenance going on at any point in time.
The same applies to water, gas, sewers, buildings, and everything else that has a fixed location,
- yeah, shows what you know.
There are many competing services, even for water, gas, sewers, buildings and everything else. It doesn't have to be 2 buildings in one exact spot, but it can be a more convenient, better, bigger building just around the corner.
Water, gas, sewers, they can all be provided with multiple carriers, there absolutely can be multiple ways to provide those services, some include building new infrastructure, some include different ways of delivery. Yes, even sewers can be managed by different means, not just central sewer system.
This is just one reason why a free market cannot provide infrastructure,
- this statement is false.
The ONLY reason that there are monopolies in this is government taking upon itself to set up licensing and tax structures that prevent competition.
The free market is simply the wrong tool for this, and it's very easy to see that except when you're a priori biased to see free markets as the answer to everything.
- more nonsense. The government is the wrong tool for this, you just didn't grow out of it yet.
You can't handle the truth.
The problem is that Amazon (a US company based in Luxembourg) are tax exempt, while local companies that employ local people and contribute to local society are not. Amazon has a price advantage by virtue of a £0 tax bill, and UK-based companies can't compete.
You need to either tax Amazon or stop taxing local companies in order to restore competitive balance. As colossal tax cuts for big business aren't top of the agenda in the middle of a painful economic slump and massive budget deficit, the former option needs to be investigated.
There's no point attempting to tax corporations, particularly big international ones, on their profit - profits just get shifted around on the books to places like Luxembourg.
The only thing you can do reliably is tax turnover (obviously at a lower rate) which is much harder to make disappear. We already *do* tax proxies for turnover in the UK (such as the employer's "national insurance contribution" which is just a tax on labour costs) so it wouldn't actually be a radical change and would enable actual tax rates to go down for the majority of smaller companies when the big boys were paying their fair share.
The big whine usually goes up at this point: but what if poor Corporation X makes a loss? Well, none of the other costs of doing business for Corporation X go away at that point, so why should tax? And if Corporation X is making a loss big time, it's not going to be in business long whether it's paying tax or not.
And your average citizen gets taxed on their earnings, not the margin between their earnings and spending (you can't offset mortgage payments or pretty much anything else of significant value), so why should it be different for corporations?