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Why Amazon's UK Tax Bill Has Dropped 50% (bbc.com)
An anonymous reader quotes a report from BBC: Amazon has seen a 50% fall in the amount of UK corporation tax it paid last year, while recording a 54% increase in turnover for the same period. This snippet of news raised eyebrows this morning when it was revealed. So what's going on? Taxes are paid on profit not turnover. It paid lower taxes because it made lower profits. Last year it made 48 million British Pounds (BP) or ~$62 million U.S. dollars (USD) in profit -- this year it made only 24 million BP or ~$31 million USD so it paid 7 million BP (~$9 million USD) tax compared to 15 million BP (~$19 million USD). What is more interesting is WHY its profits were lower. Part of the reason is the way it pays its staff. Amazon UK Services is the division which runs the fulfillment centers which process, package and post deliveries to UK customers. It employs about 16,000 of the 24,000 people Amazon have in the UK. Each full-time employee gets given at least 1,000 BP (~$1,297 USD) worth of shares every year. They can't cash them in immediately -- they have to hold them for a period of between one and three years.
If Amazon's share price goes up in that time, those shares are worth more. Amazon's share price has indeed gone up over the past couple of years -- a lot. In fact, in the past two years the share price has nearly doubled, so 1,000 BP (~$1,297 USD) in shares granted in August 2015 are now worth nearly 2,000 BP (~$2,595 USD). Staff compensation goes up, compensation is an expense, expenses can be deducted from revenue -- so profits are lower and so are the taxes on those profits.
If Amazon's share price goes up in that time, those shares are worth more. Amazon's share price has indeed gone up over the past couple of years -- a lot. In fact, in the past two years the share price has nearly doubled, so 1,000 BP (~$1,297 USD) in shares granted in August 2015 are now worth nearly 2,000 BP (~$2,595 USD). Staff compensation goes up, compensation is an expense, expenses can be deducted from revenue -- so profits are lower and so are the taxes on those profits.
The compensation relevant for taxes is the 1000 GBP the stock is worth when Amazon gives it and not its value at the end, right?
Only dead fish swim with the stream...
So when employees cash out they will have to pay tax. In the UK once they convert assets to fiat they will have to pay 20%
The interesting this about this is that you can earn A LOT more than than the usual 20% tax bracket and still pay 20%
The company is essentially pushing tax deductions on the employee with the employee seeing this a great deal to pay less tax as well...maybe even make profit as stock appreciates. It all falls apart however when share price goes sharply down and people may end up earning less than they thought they will AND pay tax on it when they cash out.
A 'singular oddity' is an event that cannot be explained and only happens when you are alone.
The employees are rewarded with shares that keep increasing in value. Why are the shares increasing in value? Because Amazon's expenses are so low. Why are Amazon's expenses so low? Because it skimps on employee salaries. How does it manage that? By giving the employees shares.
Ponzi scheme
n noun a form of fraud in which belief in the success of a non-existent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.
ORIGIN
named after Charles Ponzi, who carried out such a fraud (1919–20).
I am sure that there are many other solipsists out there.