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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.
Wow, that even already works now that the UK is still in the EU?
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
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, if the stock goes down, will Amazon have to pay higher taxes? That doesn't make much sense..
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.
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Seriously? Use the very standard GBP if your keyboard doesn't have a £. Maybe if it doesn't you can go on amazon and spend some AD on a new one.
Wanna buy a shirt?
https://www.redbubble.com/people/stealthfinger/shop?asc=u
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What the fuck are you talking about? Hard work doesn't matter in the UK, we're getting shafted hard and it's only going get harder once they trigger the inevitable nuclear brexit, the harder working the job the harder the shaft. What are these ridiculous and harmful social programs you resent? Do you mean the NHS? Some taxes are worth paying you know. Well, they are if they go to what they're supposed to instead of corporate welfare and massive billion quid bungs to hold on to power.
Wanna buy a shirt?
https://www.redbubble.com/people/stealthfinger/shop?asc=u
and buy from UK Based retailers that pay proper tax.
If you don't then there won't be any retailers left and Amazon will have won.
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.
Wow, that even already works now that the UK is still in the EU?
It's beginning to work great. The UK pound is down by 20% in the last couple of yearsand will probably fall below the value of the dollar in the near future. Yen parity will take a little longer after Brexit however. Spending, earnings, everything is down and falling. Including effective tax reciepts. No economy, no money. No money, no taxes. Living the dream!
"Hey, let's give corporations tax deductions for the cost of stocks they give to their CEOs!"
"Jolly good idea! CEOs can barely afford a third vacation house and a private jet. They need more shares of stock!"
"WTF? Why are we giving corporations tax deductions for the cost of stocks given to the peasants? This is an outrage!"
That's how capital gains work. Say I pay 1000 GBP for stock, or someone buys it for me at that price. That becomes my "cost basis" for the stock. The market value of that stock increases to 2000 GBP. I have 1000 GBP of capital gains, and if I sell at that price, I pay taxes on that gain. The company doesn't owe taxes on that gain because they sold the share before those gains accrued, so nothing is being "passed on" to the employee.
Amazon is not the only company in the UK who gives employees compensation in the form of stock. It is common practice. It allows Amazon to pay an employee but retain the cash. They are actually paying the employee more based on the stock value at time of award, and therefore paying less taxes. The employee might make more or less in the end from that stock. Most employees are very happy to receive a part of their compensation this way.
The loophole seems to be when the stock is taxed. It should be when it is given, not when it is cashed. That's like handing someone cash but only paying employer tax when the employee gets around to spending it.
London bridge is falling down, falling down, falling down...
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
It's the government breaking society apart society, not the nhs. The more they cut the worse it gets. Oh yeah, and taxes aren't going down.
Wanna buy a shirt?
https://www.redbubble.com/people/stealthfinger/shop?asc=u
I know you're joking. But it's baffling that 70 years after the US brainwashed its people against communism, there are still people around who believe this crap.
http://www.onaquietday.org/wp-...
Wanna buy a shirt?
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Total UK tax revenue in 2016: 716 billion £
Total cost of UK's EU membership after discounting the money you go back in different types of programs and payments: 8,6 billion £, meaning roughly 1,2 % of the total tax revenue or 131 pounds per person per year.
If you think your taxes are going to go down after this 1,2 % 'saving' boots you out of the biggest trade union in the world, you've probably gotten your political and economic education from the university of one prominent Solarium Sultan from across the Atlantic. Hint: you're going to end up paying more than that 131 pounds a year just in form of increasing inflation, unemployment and increased cost of importing/exporting goods. Not to mention that the fact that your government's expenditure goes down 1,2 % does not mean they will cut taxes by that amount, or any amount.
Honestly, this reminds me of Kronan the Swedish navy vessel that at the time of its sinking was the Navy's flagship and was sent out to crush some Danes. However, because at that time the Swedish navy chose officers based on family lineage instead of any kind of actual competence, this happened:
While I do not see Britts as an enemy of any kind and had wished for them to stay in the EU, as a metal fan (not the air conditioning kind) watching the UK government execute this 'widely debated maneuver' of Brexit while no-one at the helm seems to know what the plan is even in the short term, I do get reminded of the lyrics to a metal song about Kronan by the Swedish band Falconer called 'Man of the Hour':
"It is the business of the future to be dangerous" -Alfred North Whitehead
If it is the same UK where I work and pay taxes, then pay is billed at 20%, 40% and 45% from ~11.5k, 33.5k and then 150-fucking-k.
In reality, someone with about 60k salary will lose to the taxman ~17.5k, which is not exactly half. Bear in mind that this includes access to healthcare free as in beer.
Amazon has learned how to utilize the UK Tax system.
The problem with progressive taxing, is that the rich have resources to to move their money around so they appear poor to the taxing institution. The poor don't have such resources so they look like they are doing well enough be taxed at a bracket they actually hurts them.
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
Usually the stock would be taxed when the employee receives it, because the company is giving the employee something that's worth money, but there's an exemption that Amazon are (presumably) making use of here. If the shares are worth less than £X and it's been more than Y years since the employee last benefited from this exemption, no tax is due when the employee receives the shares. (I'm too lazy to look up the values of X and Y, but they're not huge.) The aim is to encourage the spread of share ownership and give companies another way to motivate employees.
Just another wannabe fantasy novelist...
Err passing it on to the -- s/employer/employee. And a minor addition: The point being companies are paying LESS tax, people are paying MORE tax, and they don't get that it's basically them getting fleeced. It's as if collecting tax will suddenly stop Amazon, Microsoft, Google, and whomever else from operating in the UK entirely. Cowards.
The people are only paying more tax because they are making more money. That's how it works. Amazon is making less profit, paying employees more, and paying less taxes. Employees are making more, how much more depends on the value of stock when they sell it. I honestly think some people here would rather have Amazon not pay these bonuses to employees, and make more profit just so they can pay more taxes.
There is no loophole. There are established tax rules on how you account for these items, they are being accounted for properly in accordance with the rules and their intent.
The UK pound is down by 20% in the last couple of years
Sterling was probably overvalued and due for a correction even before the Brexit vote, though. While the referendum result triggered a sharp drop and further falls over the following weeks, the pound has since recovered some of those losses and it now sits roughly in line with the longer term trend against the US dollar. Some economists had been arguing that it should be closer to its current level anyway, so we shouldn't necessarily expect it to continue falling or take any more sharp dives on account of Brexit (unless they screw up the negotiations, of course...).
If you disagree, post your argument. (-1, Overrated) isn't your personal censorship tool for views you don't like.
Taxing the stock when it is given means an employee gets a tax bill but doesn't necessarily have any real money to pay it with. That sort of arrangement often creates perverse incentives, and isn't normally how taxes on capital gains work.
If you disagree, post your argument. (-1, Overrated) isn't your personal censorship tool for views you don't like.
this is true in general, but Amazon is special,
they really keep their prices as low as possible and earnings as low as possible because they would rather earn 0% profit or even loose money some years, but increase market share by 10%+ than earn few billions but increase market share only 1%
every country taxes profits, not revenue, if you or company earn 0% (or loose money) there is nothing to tax (in some countries they even give you money back/negative tax)
so company that tries to take as much your money as possible, and has huge profit SHOULD pay huge tax, but one that sells you stuff "at cost" or even "below cost" does not pay any taxes (or in some countries gets "negative tax" back from government
off course most companies try to extract as much money from you, but some would rather you buy everything from them during your whole life, even if it means they don't earn profit, because they value market share more than profit
Its not fleecing the UK. It is perfectly legal and common practice. It is compensating employees with stock vs cash in proportion to what makes the best business sense according to established law. There is a reason that a large majority of most employees pay is still the traditional paycheck. Bonuses in the form of stock are desirable to employers and employees. Change the laws and the ratio of stock bonus to paycheck would change accordingly. The number you cited drive the behavior, but its not fleecing. Amazon is giving up equity so they can keep cash. Cash rich companies spend money, which benefits countries in other ways. Rising stock prices benefits all stockholders, many of whom are UK taxpayers but not employees of Amazon, therefore benefiting the UK as well.
If employees are granted options to purchase stock at current value at some future date following, say 3-5 year vesting period, the employee has not received anything of value. After the vesting period, the employee can choose to exercise the option and buy the stock from the company at the promised value. In US tax system this triggers an income tax on the option value. If the employee sells the stocks (not uncommon in this deal, a buy/sell agreement), he or she will also then face a short-term capital gains tax on the profit.
So, say Company offers employee 1000 shares of option at $1/per share with a 5 year vesting period (current stock price). The employee has not received any tangible benefit at this time, and so faces no tax for the 5 year period. After the 5 years, he is vested and with the stock now at $5/share, he decides to buy/sell and cash out. he does have $1000, so borrows $1000 from the company to buy the stock, sells the stock back at $5000, pays off the $1000 loan from the proceeds basically all at the same time. He has $4000 in profit. On his taxes he will face income tax for the $1000, and ST CG for the $4000. But all this is 5 years after the original grant. If in the intervening 5 years, the stock price instead went to $0.50 the employee faces a loss if he exercises the option, so he will probably not accept the option at that time. Why should he get taxed on money he never had in his hands?
It depends on how the stock is awarded. If it's in options, for example, you don't get taxed until you exercise the option. Which is why you never, ever, ever exercise options then hold the stock, you always sell it right away. People got left holding massive 6 and 7 figure tax bills for worthless shares doing this when the last tech bubble burst.
I browse on +1 so AC's need not respond, I won't see it.
Firstly, any stock awarded to an employee in the UK is immediately given a "Fair Market Value" evaluation -- again that's ***on award***. So, if you get given 1,000 GBP worth of stock tomorrow, and you pay nothing for it, the UK will tax you at whatever your income rate is for that 1000 GBP.
Are you sure? The US does it differently, and in a way that is much fairer and seems more consistent with the article.
In the US, the FMV is assigned at vesting, not at date of grant. This is much better, because at vesting some of the shares can be (and generally are) automatically sold and withheld to cover income taxes, reducing the chance that the employee gets ambushed with a huge tax bill.
Also, the structure you describe seems very weird when lined up with the article, because apparently (per you), the stock's value counts as income to the employee when it is granted, and (per the article) it doesn't count as an expense against the company until it vests, and those events have different values. So employee income comes out of thin air on the grant date (because it's not from the company, which hasn't seen a corresponding expense) and then company expense goes nowhere on the grant date (because it's not paid to the employee). It seems like accountants would have to invent some sort of future liability contract to cover the grant and make the books balance.
It's not impossible that you're right, but I'm skeptical.
Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
Communism isn't all or nothing. The most successful countries on the planet have publicly funded healthcare, that doesn't suddenly make them Cuba or the USSR.
Or is your argument that anything that Cuba has must be bad, simply because it's Cuba? In that case I recommend you stop eating food, because communist countries have that too.
The ISO code for British pounds is GBP, not BP.
systemd is Roko's Basilisk.
That's not a problem with progressive taxation, it's a problem with complicated taxation rules.
The rules are designed by the rich to make it easy for the rich to circumvent. If the tax code wasn't thousands of pages long, the odds are the loopholes wouldn't exist.
Better go warn the people of Lake Havasu City, Arizona.
https://en.wikipedia.org/wiki/Lake_Havasu_City,_Arizona
Do the social democracies like Germany or Norway invent amazing new technologies like the Internet or smartphones? No, that was the US,
Germany invented the first programmable computer, I'd like to see how your internet and smartphones would have worked without that. Also the smartcard, the first oscilloscope, SMS for cell phones, morphine, x-rays, etc. Norway's inventions include things like Object Oriented Programming.
Do your social democracies like the UK have the best health outcomes? No, that's the US - be chance of survival for infants, cancer, heart disease, HIV...
Despite the US spending nearly three times the amount per capita on health care as the UK (and even ignoring private money the US government spends almost 25% more than the UK on health care), the average life expectancy in the UK is 3 years longer than in the US, all cause mortality in the UK is lower than in the US, and specifically the UK has lower mortality rates for cancer and heart disease, and has half the infant mortality rate of the US. (I didn't immediately see figures for HIV)
Do you social democracies like France or Sweden perform huge amounts of medical R&D? No, that's the US, which provides half of the entire world's medical R&D.
Sweden spends more money per capita on medical research than the US. And in per-capita spending, the US is behind even such countries as Signapore and South Korea.
Same for USA! I like to visit local stores and buy if the prices are right for the products they have in stock. Even pricematching!
Ant(Dude) @ Quality Foraged Links (AQFL.net) & The Ant Farm (antfarm.ma.cx / antfarm.home.dhs.org).
Thanks for helping to make my point
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the 40% tax kicks in at 44k-ish not 33k, you're forgetting about the 11k tax free threshold below which you don't pay any income tax.
> Amazon is making less profit, paying employees more, and paying less taxes. Really? http://www.visualcapitalist.co... Seems like Amazon is making a shitload more money than last year to me.
Don't confuse market cap, overall revenue, and UK profits with each other.
That can be very dangerous if you get pushed into AMT due to the options conversion. You could end up with worthless stock and a 6-figure tax liability. This happened to a thousands of people during the last tech bubble bust. If it's a stable company then yes, but most times those big options packages (unless you are an exec) are coming from startups. No thank you. Convert and sell.
I browse on +1 so AC's need not respond, I won't see it.
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