Amazon’s tax bill payable on more than £6billion of UK sales is effectively being kept secret from the public, a Mail investigation has found.
Around £2 in every £3 of revenue the online giant makes in Britain is funnelled through firms based in Luxembourg.
It means the amount of tax that Amazon pays on the majority of sales in Britain is hidden from public scrutiny.
Amazon’s tax bill payable on more than £6billion of UK sales is effectively being kept secret from the public, a Mail investigation has found
The company has also set up a complex web of ten UK companies which use accounting deductions to reduce its tax bills to the lowest possible level. The latest revelations will only intensify the row over how much tax the web giant pays at a time when the British high street is under unprecedented strain.
Yesterday the Mail revealed Amazon’s biggest UK division – its services arm – was billed just £4.5million in corporation tax last year, down from £7.4million in 2016. This came despite revenues for this one division alone climbing by £500million to almost £2billion.
Yesterday, MPs, retail bosses and campaigners demanded radical reform of the tax system so traditional stores can compete on a ‘level playing field’ with Amazon. The Mail has been campaigning for a review of business rates to save high street stores being crippled by rising bills, while Amazon pays lower rates on its out-of-town warehouses.
Around £2 in every £3 of revenue the online giant makes in Britain is funnelled through firms based in Luxembourg
Former Sainsbury’s chief executive Justin King said online companies were being given an ‘unfair advantage’ and called for ‘arcane’ business rates to be halved. He said: ‘We need to find a different way to tax business activity, one that does not fall so heavily on a business like traditional retail that uses a lot of space.’
The latest controversy embroiling Amazon erupted when on Thursday accounts for its UK Web Services division showed it paid just £1.7million after deductions on its £4.5million corporation tax bill. Analysis by the Mail, however, reveals its tax affairs are even more complex and opaque.
The firm has a web of companies in the UK, Luxembourg and the US that cast a veil over the full scale of its UK tax liabilities.
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Accounts for eight of the ten firms listed on Companies House with available information reveal they generated £2.9billion in sales.
Their total tax bill was £20.8million on profits of more than £160million. However, British sales totalled £9billion according to Amazon’s US report for 2017 – meaning £6billion worth are not sent through UK-registered companies. Amazon says this cash, which is largely for retail sales on items purchased on its website, is handled through Luxembourg.
The firm has a web of companies in the UK, Luxembourg and the US that cast a veil over the full scale of its UK tax liabilities
Firms there are not bound by the same accounting rules as in Britain, meaning Amazon is under no obligation to disclose tax it pays on UK sales funnelled through the EU nation. Amazon does pay corporation tax on the profits from this arm, but this is agreed privately with HMRC. The only clue is based on the amount of tax paid by Amazon on £20billion in European sales, which suggest its total bill in the UK is likely to be between no more than £25million to £35million.
Earlier this year, a Mail investigation found Amazon pays only £14million a year in business rates for its 13 enormous warehouses - far below the costs faced by traditional high street stores. Marks & Spencer, for example, shelled out 12 times more. MPs last night demanded a change in the law so traditional retailers can compete on more equal terms with online giants such as Amazon.
Dame Margaret Hodge, former head of the Commons public accounts committee, said: ‘It is scandalous, it looks as if we are paying them to kill the high street. It is a complete outrage. The Government has got to start acting tough not talking tough.’
Rachel Reeves, chairman of the business committee, said Amazon’s tax bill was ‘jaw-droppingly low’, adding: ‘Just because Amazon is capable of employing smart accountants to minimise its tax bill, it does not make it right.’
Tory MP Patrick McLoughlin, a former chief whip, said ‘The Government has got to look at ways of levelling the playing field between the high street shops and these internet giants.’
And Labour MP John Mann said the country needed to ask whether ‘we want our lives run by handful of multinationals’. Last night, an HMRC spokesman said it did not comment on individual cases but that it had collected over £9billion in additional revenue from large business in 2017. It added: ‘We subject large businesses to an exceptional level of scrutiny.’
Amazon said: ‘We pay all taxes required in the UK and every country where we operate. Corporation tax is based on profits, not revenues, and our profits have remained low given retail is a highly-competitive, low margin business and our continued heavy investment.’
Taxman 'was ordered to go easier on them'
Leaked comments by an HMRC official revealed the taxman has been told not to be ‘too hard’ on Amazon.
Deputy director Guy Westhead was recorded saying ministers had been reluctant to take on Amazon over claims of tax avoidance.
The remarks were made in a private conversation with tax campaigner Richard Allen in 2015, who has lobbied HMRC for better enforcement of VAT law. He told Mr Westhead: ‘What worries me is ministers have some kind of agenda to basically not annoy Amazon.
‘If Amazon does something illegal Amazon has to be punished in my view. In America they tried things like “that’s it, we are not building a warehouse in your State” and all this sort of stuff.’ Mr Westhead responded: ‘I’ve heard from the Treasury, the Treasury didn’t want us to be too hard on Amazon.’
Earlier this year, the Treasury said it would start clamping down on web giants and consider new rules which would see a levy introduced on revenues earned in the UK. It would affect web giants such as Amazon and Google if put in place.
A Treasury paper in March said ‘the Government’s view is that ... action is needed’ amid fears that tech firms’ meagre bills could ‘undermine the fairness, sustainability and public acceptability of the corporate tax system’.
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