For convenience and to create a working market in Europe’s fragmented
continent, the Europe Union – with the open-eyed sanction of its member
states – has constructed a way for companies to be legally HQ’d in one
country in Europe (and taxed there) but trade all over Europe, thus
creating a notional ‘single market’. There’s only one problem – this
encourages companies to locate their legal HQ in a country with a low
tax regime, while trading in all the rest. Not only that – it also
allows companies to transfer assets and income between subsidiaries. Heavens to murgatroyd! It’s just like Capitalism!
But the latest example of how all this operates hit the news this week when it emerged that Amazon had paid just £4.2m in tax last year, despite selling goods worth £4.3bn. This is more that the combined UK sales of Argos, Dixons or Marks & Spencer Food, all ‘Main Street’ retailers in the UK. The previous year it paid £3.2m in tax. What tax it does pay in the UK is on it’s UK subsidiary. Amazon.co.uk reported profits of £17m in 2013, and effectively paid 24% of that in corporation tax, the legal going rate.
Predictably, policiticians weighed in on the headlines, as they yawningly do every year without doing much about it. They said we (we!) should shop elsewhere. No doubt politicians in other parts of Europe, where Amazon trades, are doing the same thing.
This strategy can have some effect. Starbucks resumed a more ‘normal’ UK tax payments last year, after a little outrage from the great British public. But then, you can often choose which coffee shop to walk into when you’re out on the street. Online, the convenience of buying in one click from Amazon, rather than punching in credit card numbers into some other online store, is a temptation just too much to bare for many. In the last ten years Amazon has paid just over £10m in taxes. But in the last four years it’s generated £23bn in British sales.
And of course, the principle is very simple, and well known to the tax accountants serving the likes of Amazon, Google and many other US tech giants.
Simply take online payments via a subsidiary based in a low tax jurisdiction – in Amazon’s and many other cases it is the tiny state of Luxembourg – but locate all your warehousing, engineering, accounting, human resources and other functions in a country where you can easily hire and fire, attract talent and conduct an efficient business.
Read more: R.O.W. With Butch — Either Tax Tech Giants In Europe Correctly, Or STFU | TechCrunch
But the latest example of how all this operates hit the news this week when it emerged that Amazon had paid just £4.2m in tax last year, despite selling goods worth £4.3bn. This is more that the combined UK sales of Argos, Dixons or Marks & Spencer Food, all ‘Main Street’ retailers in the UK. The previous year it paid £3.2m in tax. What tax it does pay in the UK is on it’s UK subsidiary. Amazon.co.uk reported profits of £17m in 2013, and effectively paid 24% of that in corporation tax, the legal going rate.
Predictably, policiticians weighed in on the headlines, as they yawningly do every year without doing much about it. They said we (we!) should shop elsewhere. No doubt politicians in other parts of Europe, where Amazon trades, are doing the same thing.
This strategy can have some effect. Starbucks resumed a more ‘normal’ UK tax payments last year, after a little outrage from the great British public. But then, you can often choose which coffee shop to walk into when you’re out on the street. Online, the convenience of buying in one click from Amazon, rather than punching in credit card numbers into some other online store, is a temptation just too much to bare for many. In the last ten years Amazon has paid just over £10m in taxes. But in the last four years it’s generated £23bn in British sales.
And of course, the principle is very simple, and well known to the tax accountants serving the likes of Amazon, Google and many other US tech giants.
Simply take online payments via a subsidiary based in a low tax jurisdiction – in Amazon’s and many other cases it is the tiny state of Luxembourg – but locate all your warehousing, engineering, accounting, human resources and other functions in a country where you can easily hire and fire, attract talent and conduct an efficient business.
Read more: R.O.W. With Butch — Either Tax Tech Giants In Europe Correctly, Or STFU | TechCrunch
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