Amazon exec tells UK peers: No, we don't want to be dominant. Also, we don't fancy being taxed on revenues

Things would be lot simpler for Amazon if people had a better understanding of corporation tax and didn't think online tracking was so sinister, according to the UK director of public policy for the £634bn online marketplace giant. Parliament photo by Shutterstock Brit Lords start peer-to-peer wrangling over regulating the …

[alain williams]

Tax allowance for costs is a grace

allowed by the tax man in recognition that goods sold are (usually) not free to the seller. It is part of the tax man being reasonable and not taking the piss.

However: Amazon (& others) are taking the piss by artificially exporting profits overseas to a low tax country.

Thus it seems to me that it would be reasonable for the Inland Revenue to remove the allowance grace for Amazon. It would be up to Amazon to prove to the Inland Revenue what are the real cost of the goods that it provides and then ask for the grace to be applied to that.

Some things should be specifically excluded, such as some Intellectual rights, use of company name, ... which are fantasies just to provide a fig leaf to syphon more cash overseas.

[Peter2]

Re: Tax allowance for costs is a grace

Not to mention the chaps other argument:-

we invested £9.3bn in the UK in the last eight years and obviously that has an impact on profitability in the short term."

In other words, we made 9.3 billion profit in the last eight years, but spent that 9.3 billion on buying other companies that actually pay tax which results in that cost as being counted as an investment. We've converted the tax bill to investments in buying other companies that were paying tax too and repurposed that expenditure towards tax evasion too. Everybody wins, our management get bonuses, the tax lawyers make a lot and we give the workers and extra pea at Christmas so we don't look too scrooge like.

So everybody wins, except the tax payer who loses about £1.2 billion short a year. And they are only having to borrow £1.9 billion a year to keep the hospitals etc open. After all, it's not like we're the only company doing this, lots of companies are at it so it'd be unfair to single us out!

That revenue tax can't arrive soon enough as far as i'm concerned.

[Graham Triggs]

Re: Tax allowance for costs is a grace

There is already a tax on revenue - it's called VAT. Apart from books and a few other items, 20% of everything we pay to Amazon is handed over to HMRC. And it's paid regardless of whether Amazon makes a profit or not.

And then in addition to that, there is a tax on profit. A tax on profits isn't just a "grace" that recognises costs, it encourages businesses to invest in the business, to reward their employees, etc.

Adding another revenue based tax is really just increasing the effective VAT rate by stealth.

Whether the likes of Amazon are taking the piss by artificially offshoring profits is a matter of conjecture - we have to at least recognise that their is value to a UK business that is being added by activities in other jurisdictions / business units: overall brand awareness, development of shared technologies, etc. Sometimes it is hard to put a monetary value on that. I think one thing that is clear is that it should only be considered a legitimate business expense if it is transferred directly to the jurisdiction that is providing the value, and not via an intermediary / holding account.

But if we are going to get into discussions about taxation, there shouldn't just be screaming headlines about corporation tax compared to overall revenues. Every story should list, itemised, not just the corporation tax, but also VAT, the amounts paid via PAYE to the exchequer, etc. Lets see everything that a business is handing over to the exchequer in relation to it's revenue, before we decide whether to be hysterical about it or not.

[I ain't Spartacus]

Re: Tax allowance for costs is a grace

Graham Triggs,

VAT is not a tax on turnover. Large companies don't pay VAT. They put it on their sales invoices as an extra line, and then pass that extra money they've collected to the government - less the amount of VAT they've paid on their purchase invoices. The people who pay VAT are the consumers at the end of the sales supply-chain who can't claim it back. So long as your sales are larger than your purchases, VAT just increases your cashflow and paperwork.

VAT is a tax on consumers - and any business small enough to be indistinguishable from a consumer - like a decorator.

The only difference between a VAT and a sales tax is that the VAT involves a lot more paperwork. The upside of that being the government don't care (as they're not doing it) but they do get better economic data and it's harder to defraud the system.

[Doctor Syntax]

Re: Tax allowance for costs is a grace

"The people who pay VAT are the consumers at the end of the sales supply-chain who can't claim it back."

And just who, ultimately, do you think would pay a tax on revenue? If you put another 20% on sales it would simply result in prices being raised to pay it.

[TheVanguard]

Re: Tax allowance for costs is a grace

"If you put another 20% on sales it would simply result in prices being raised to pay it."...

Surely that would mean people would be less likely to shop at Amazon...and more likely to shop in local stores..who pay tax, and employ local people, who in turn put money back in the local economy

[Rameses Niblick the Third Kerplunk Kerplunk Whoops Where's My Thribble?]

Re: Tax allowance for costs is a grace

Surely that would mean people would be less likely to shop at Amazon...and more likely to shop in local stores..who pay tax, and employ local people, who in turn put money back in the local economy

It's almost like this has been thought about...

[Ian Michael Gumby]

Re: Tax allowance for costs is a grace

Adding another revenue based tax is really just increasing the effective VAT rate by stealth.

No, not exactly.

Amazon like other global countries play games.

The classic is Starbucks...

They buy the coffee from the source, ship it to a company that is a wholly owned subsidiary in a low tax country. Then they have the shops buy the coffee from that company (sole supplier) at an inflated price as to capture as much revenue at a lower tax rate.

Here's an example.

Suppose you pay $10.00 a pound for Starbucks coffee.

Starbucks buys the coffee for $1.00 a pound in Columbia or wherever the coffee is grown.

If they shipped it directly to your country, they would have a profit of $9.00 which is taxable in your country.

Now suppose instead, they ship the coffee to a wholly owned subsidiary in a different country which has a lower tax rate. This company purchases the coffee for $8.00 a pound capturing a profit of $7.00. It pays taxes on the $7.00 profit. It then sells the coffee to the local company store for $9.00 a pound, which still sells the coffee to you for $10.00 a pound.

So the local country collects taxes on $1.00 profits and Starbucks retains the delta on the difference in tax rates * $7.00.

All done in the name of share holder revenue back in Seattle ... ;-)

If you don't like Coffee, try advertising. Google's office is in Ireland. So when an ad is sold in France, viewed only in France, Google claims that the transaction took place in Ireland so that they get taxed at a lower rate with the money flowing to Ireland. The only tax revenue France sees is on the 'representative' who assists in the transaction... his/her salary.

The point is that accountants game the system to reduce taxes and costs to retain as much revenue as possible.

[katrinab]

Re: Tax allowance for costs is a grace

The VAT rate in Ireland is 23% vs 20% in France.

But the customer (the company placing the ads) reclaims any VAT charged by Google, and then they may or may not charge VAT on the resulting sales of the products advertised.

[Chris Miller]

Re: Tax allowance for costs is a grace

Ignorant nonsense, Mr G, I'm afraid. HMRC took Starbucks to court on this very point - they lost. Any costs charged by overseas subsidiaries of a parent company must be justifiable as reasonable - if they aren't HMRC can and will challenge them.

And do you arrange your personal tax position to maximise the amount of tax you pay? If not, why not?

[Norman Nescio]

Re: Tax allowance for costs is a grace

Justifying transfer pricing as 'reasonable' is something that large multinational companies can afford to pay extremely capable accountants to do. Blatant exploitation is made difficult by HMRC, but minimizing your tax bill is not illegal, and large companies can afford the best advice.

Other ways of navigating just the right side of the fuzzy boundary between tax avoidance and tax evasion include licensing of intellectual property and franchising. The intellectual property is owned by a subsidiary in a low-tax country, and companies elsewhere are required to buy licences e.g. to use the logos and marketing materials, which conveniently generates a revenue stream in a low-tax environment and costs in a higher-tax environments. This method is used by software companies that licence software too.

None of this is illegal, but large multinational companies have access to resources (like tax planning departments, and tax consultancies) that private individuals either cannot afford, or cannot make use of. Working people see that as their salary increases, above a certain level the tax take also increases (e.g. from basic rate to higher-rate income tax), yet it appears that large companies are able to reduce the percentage they pay in tax by making use of 'constructive' methods that are not available to others. This is perceived as unfair.

Large companies by-and-large play by the rulebook. But when the rulebook is many hundreds of pages thick and requires interpretation by experts, the average man in the street is at a significant disadvantage, as in fact are many small company owners. If I could pay the same percentage of my income to accountants and tax-planners as large companies do, and get the same percentage of legal avoidance of taxation as large companies do, I would do so in a heartbeat. The trouble is, you don't get much advice for tuppence-ha'penny. In addition, there are many schemes I cannot take advantage of. So the old truism applies: it is the poorest that pay the highest prices cf. pTerry: Sam Vimes Theory of Economic Injustice.

[Clunking Fist]

Re: Tax allowance for costs is a grace

Starbucks?

So what you're saying is that Amazon buy their Samsung Galaxy S9s from Colombia for $10 and sell them to Amazon UK for $790 who sell it to UK consumers for $800?

Or are you saying that Trotters Ind Traders import a load of S9s for $790 and sell them on Amazon for $800 and Amazon gets $8 per trade for "facilitation"? Then Amazon pays tax on the profit from $8 (which is $8 less the wages of it's UK employees and the rent on its UK office and the cost of running their server farms and their internet connections?

[Peter2]

Re: Tax allowance for costs is a grace

Personally, I think that the entire tax system needs a radical revamp. However, absent of that happening the companies abusing the existing system need to be hammered sufficiently hard to recoup the lost revenue and discourage other companies from playing the same games.

Lest we forget, that lost tax money is contributing towards an financial crisis in public sector finances.

[Anonymous Coward]

Re: Tax allowance for costs is a grace

Lest we forget, that lost tax money is contributing towards an financial crisis in public sector finances.

To a modest extent. The main driver of of the crisis in public finances is that the government are keener to spend money than to raise it, which is why UK government borrowing is around 45 billion quid a year. Estimates of the scale of UK tax avoidance by global (and mostly US) companies tops out around £9bn. Very nice to have that, but not going to plug the £45bn hole.

Fixing corporate tax avoidance would be a start, but that still requires at least £36bn to be found through spending cuts or higher personal taxes for you and I.

You are of course right on the need for a radical revamp of the UK tax code, which requires over 21,000 pages of specialist guidance to explain (Tolleys) - and that complexity is perhaps the main reason that there's so many loopholes. But with the current shower of piss (or the shower of piss in waiting on the opposition benches) there's no chance tax is ever going to be simplified.

[Anonymous Coward]

Re: Tax allowance for costs is a grace

You should find out what "tax incidence" means. In the end, only individuals pay tax. Any company tax is ultimately paid by some combination of the customers, the staff, and the owners. Push up Amazon's operating costs and the selling price will go up, and who will be paying ? You,. that's right, ultimately you finish up paying the tax.

Only most people are too stupid or greedy to recognize that.

[katrinab]

Re: Tax allowance for costs is a grace

"Apart from books and a few other items, 20% of everything we pay to Amazon is handed over to HMRC"

Not so. On marketplace transactions, they pay VAT only on their commission, and if that is related to a company outside the EU, then it is classed as an export sale at 0%. Then the Chinese retailers who list products on their site don't pay VAT on their sales.

[Aladdin Sane]

Re: Tax allowance for costs is a grace

Also, it's not 20% of the sale price, it's 1/6th (or 16.66667%). Welcome to grown up maths.

[The First Dave]

Re: Tax allowance for costs is a grace

Technically it IS 20% of the sale price - what you pay is the sale price + VAT

[Matt Ryan]

Re: Tax allowance for costs is a grace

This is why the public could do with a better understanding of tax. The allowance you reference isn't for the cost of the goods - it's to cover investment which can be offset over multiple years.

It's also worth noting that corporation tax is incident on the consumer rather than the company. The company already pays significant tax via their employees in the UK.

It'd be much better to simplify the tax rules so that these 'schemes' are pointless.

[I ain't Spartacus]

Re: Tax allowance for costs is a grace

Matt Ryan,

I thought corporation tax was generally considered to be incident on shareholders and customers? In a proportion that would be determined by how much control Amazon has of pricing. The less they have the power to raise prices, and still make money, the more of the burden of corporation tax will fall on their shareholders, and the less on customers.

Otherwise I agree with you.

Amazon haven't made any kind of serious profits until the last couple of years - as they've re-invested all their profits in growing the business. So they haven't needed to do anything clever to avoid tax - other than schemes to shop around the EU Single Market to charge the lowest rate of VAT they could get away with to out-compete companies in higher VAT jurisdictions. See the CD warehouse on Jersey for an example (until the loophole was closed).

Now they're making money, as the shareholders insisted on some return on their equity, we'll see how they do on paying tax.

[Just An Engineer]

Re: Tax allowance for costs is a grace

"Now they're making money, as the shareholders insisted on some return on their equity"

I might just be me, but if stock purchased prior to 2006 for around $5.00 per, or even in 2016 when it priced out at ~$300.00 and today it is $1650.00 per share, I think they have gotten more then a fair return on equity.

Shareholders have not asked for profitability only share price appreciation.

[Doctor Syntax]

Re: Tax allowance for costs is a grace

"Shareholders have not asked for profitability only share price appreciation."

If there isn't a prospect of profitability to justify the increase in share price the shareholder has just bought a piece of the underling assets and would probably be lucky to get more than a fraction back were the assets to be sold off. Good luck with your retirement if your pension is based on investments like that.

[Clunking Fist]

Re: Tax allowance for costs is a grace

"Shareholders have not asked for profitability only share price appreciation."

In most(many?) countries, share gains are taxable as either a capital gain (for investors & pension schemes) or trading profits (for share traders).

[Doctor Syntax]

Re: Tax allowance for costs is a grace

"I thought corporation tax was generally considered to be incident on shareholders and customers?"

The money to pay shareholders comes from customers - unless there's something dodgy going on or the firm's flogging off assets there's nowhere else to get it from.

The point she makes about what happens if a revenue tax on items with a thin profit margin is valid. Either the line gets dropped or the price has to be raised in order to break even let alone contribute to the shareholders' dividend. In order to determine whether it really is a thin profit margin one does have to check on the source of course and make sure it's not being bought from another arm of the business in a jurisdiction with a lower tax regime.

[Anonymous Coward]

"the company already pays significant tax via their employees in the UK"

Sorry, it's the employees who pay taxed with money that belong to them. Let's not try to hide issues behind a finger. And remember the money you pay to an employee are a cost companies deduct from their revenues. While companies like Amazon are also the companies trying to minimize wages while funneling money abroad using any mean they can find to avoid to pay taxes on profits.

Evidently corporation pay taxes with what they collect from customers, but there is no strong, direct correlation between goods/service prices and taxes paid - otherwise the iPhone should be one of the cheapest phones.

But still customers pay goods/services with what companies pay them.... so it's evidently circular, and if you want a functioning state at each turn someone has to pay some taxes, and you if you tax only customers and employee, you have to tax them a lot, while companies hides profits away....

[Anonymous Coward]

Re: Tax allowance for costs is a grace

Transfer pricing is very tightly regulated with external entities. I think you need to understand taxation and the law on these things a little better. Amazon cannot simply set what prices it will charge at various points along the supply chain, each price has to be justified and supported.

[Anonymous Coward]

But how do you account for this?

Let's say Amazon UK (a wholly owned subsidiary of Amazon which is a US based company) buys widgets from China for £1 each and sells them to you for £2. Easy to calculate profit on them selling one more widget as being £1. If there's an Amazon Bermuda (also a subsidiary of Amazon) that buys the widgets from China at £1 and sells them to Amazon UK at £1.99, they make only £0.01 off your transaction.

That's cost shifting from Amazon on a global perspective, but as far as Amazon UK is concerned - which is the only part of Amazon subject to UK taxes - they just aren't very profitable. How do you write UK tax law to allow them to tax Amazon as a whole, when it isn't located in the UK and doesn't do business in the UK other than via its Amazon UK subsidiary? I don't see any practical way to do so.

Now that US is no longer taxing worldwide income, the incentive is far greater for US companies to play the same games, with the same result. This is probably why the US taxed worldwide income in the first place - which worked here since many multinationals are based here. The only mistake was waiting to tax it until it was brought back into the US - providing an incentive for companies to park billions offshore on the hope that someday it might be cheaper to bring home.

[John Mangan]

Heh?

"it paid £2bn on pre-tax profits of £72.4m."

How does that work then? I thought corporation tax was only paid on profits. I thought that Phil only announced the 'digital tax' a few months ago so that can't be included.

Anyone?

[Yet Another Anonymous coward]

Re: Heh?

It paid £1,7M on £72.M profit, so it paid abut 4% tax - apart from the question of how it made only £72M profit on ££££££ of AWS sales

[Time Waster]

Re: Heh?

Now, my maths is pretty rusty, but I make that more like 2%. Clearly your point still stands.

[Christopher Reeve's Horse]

Percentage change - that old trick!

An 89% increase of bugger all is still pretty much bugger all, even when you add it to the bugger all you already had.

[Sir Runcible Spoon]

Death of the High St

Whilst Amazon and other online retailers have certainly had their impact, in the UK at least I would definitely blame 50% of this on local councils ripping people off to park in town, and hiking the business rates up so high that shops are no longer profitable.

I've never quite understood how an empty premises brings in more rent money than an occupied one - but what do I know? If only I had the brains of some of the people in these council offices I might be able to ignore all this shit and pretend it doesn't matter!

[Graham Triggs]

Re: Death of the High St

We have fairly high levels of employmeent, and with sex equality it often means that all adult members of a household - and certainly amongst those with disposable income - are working Mon to Fri.

So footfall midweek is quite depressed anyway, and even at the weekend - are you going to spend half your day off going into town to buy a CD, when you could download it instantly and spend the day doing something more interesting?

We can lament the demise of the high street, but the reality is a lot of it has been supplanted by ways of doing things that are better for most people, and if those businesses hadn't previously existed we wouldn't be creating them now.

[Sir Runcible Spoon]

Re: Death of the High St

Have you been to any supermarket mid-week?

I sometimes wonder if I'm the only person who still works - either that or there are a *lot* more people around than we think there are :)

[Anonymous Coward]

Re: Death of the High St

Just stop using Amazon. It is that simple.

I've weaned myself off them in the past year. Now I will only use them if there is nowhere else to get the thing I want.

Then

Shop Locally. It keeps people in work who pay taxes rather then feathering the nest of Bezos who has more money than some countries already.

F**k Amazon.

[Wincerind]

Re: Death of the High St

"Just stop using Amazon. It is that simple."

Oh if it were that simple. I spent a few hours a couple of weeks ago trying to buy mothballs (for clothes moths). I tried all the big brand supermarkets in town (we have all 4) plus diy stores & the "we sell everything" stores. No luck, I might as well have been trying to buy leopard's fanny batter.

Ended up going to Amazon.

Basically if the shops don't sell it we can't buy it.

[Sir Runcible Spoon]

Re: Death of the High St

Can you send me the link to the leopard's fanny batter on Amazon please? My wife's birthday is coming up and I want to give her a pressie she'll never guess.

[tiggity]

Re: Death of the High St

I know 2 local shops that sell mothballs (may well be more - just remember seeing them in 2 shops)

But one of the few advantages of living in the sticks is that there is still a bit of shop variety and lots of quirky independent places left.

[Teiwaz]

A "mystique" has built up around the term "algorithm", she added, but went on to say that "it's just maths" and Amazon's tracking of customer activity was "the same as old retailers counting footfall".

How come then, tracking in order to sell me more, results in ads for things I've already looked at and dismissed for a similar product or already bought?

The only mystique is that some businesses still seem to think that this method works.

[N2]

Nowt to do with Amazon

They just bend the law as far as it will go,

What needs changing is the taxation laws but the MPs etc wont do that because it would affect them too.

[Anonymous Coward]

Re: Nowt to do with Amazon

Change the law so you pay corporation tax if you fail to make a profit due to investing in growing the business ( insane )?

Change the law so you pay higher business rates if you use low value land for a warehouse in an industrial estate than if you use highly sought after land in the town centre ( daft )?

Change the law so you can't shop VAT rates around the EU ( sensible but that depends on, shall we say, other events, we'll see )?

Change the law so you pay a tax on revenue ( ie: increase VAT )? People weren't chuffed about the 17.5% > 20% increase. Why would they be happy about increasing that further ( are we going to pretend that a tax on revenue isn't basically just increasing VAT ? )

Change the law so the international arm of a company ( ie: UK arm ) can't buy goods and services from other arms of the same firm ( batshit crazy )?

[Anonymous Coward]

"Change the law so the international arm of a company ( ie: UK arm ) can't buy goods and services"

Exactly. You're the same company, so you shouldn't be allowed to use dirty tricks like inflated prices of goods and IPs to hide profits.

These are loopholes that need to be closed. For example, make companies pay full VAT on such transactions. Starbucks US sell coffee at 50/kg euro in EU, fine. Pay 20% non-deductible VAT on it....

Amazon US leases its logo to Amazon Italy for 1Bn? Fine, pay 22% non-deductible VAT on it...

[Anonymous Coward]

Re: "Change the law so the international arm of a... title too long

I don't quite know what you think VAT is, but it's certainly not what it actually is.

[Doctor Syntax]

Re: "Change the law so the international arm of a... title too long

"I don't quite know what you think VAT is, but it's certainly not what it actually is."

I think the term he was looking for might have been withholding tax. It certainly isn't VAT.

[J.G.Harston]

"You're the same company, so you shouldn't be allowed to use dirty tricks like inflated prices of goods and IPs to hide profits."

And they're not. wossit called, Transfer Pricing Rules requires companies to bill itself internally exactly what the market price is and not something artificailyly inflated or deflated.

[Graham Triggs]

Re: Nowt to do with Amazon

Couple of things:

1) The EU stepped in to stop using low VAT rate administrations for distance selling - if you sell to the UK, VAT is due to the UK.

2) Tax on revenue vs VAT - anyone who realises that it is pushing up their prices is not going to be happy with an effective increase on VAT rate. But as you can see from these comments there are people that completely disassociate the revenue of a company from the price that we are paying for goods and services.

The business rates question is an interesting one though - you certainly want to avoid removing incentives that get distance business to build large warehouses in low land value / high unemployment areas. Because getting distance sellers into those locations is part of how we can address the regional divides in the country.

But at the same time, as it is displacing local revenue from businesses, there is a reason to want to get some money and redistribute it to where the sales are made.

[Jellied Eel]

World's most valuable company?

Neither could she offer a breakdown of AWS revenues on a country-by-country basis.

I'm curious to see the transcript for the precise Q&A. Otherwise we're meant to believe that Amazon's 'invested' 9.3bn, yet has no idea about revenues. And thus profits, and any ROI. I'm fairly certain Amazon's treasury team could provide a breakdown, but probably only under extreme duress.

But then that's how these games are played. Load the costs, suck out the revenues and profit? What profit? Along with other tricks, like making sure sales are booked in the lowest tax jurisdiction possible. I think the only way to fix this is internationally, and by taking a long, hard look at how internal costs are valued and allocated, and agreeing that off-shore sales are a contrived method for tax avoidance. Currently she's right though, international tax treaties allow this kind of tax minimisation.

[codejunky]

Ha

"But there is a growing interest in making tech companies pay what is often described by critics as their fair share"

If its not 110% some people wont be happy. Not until the company has packed up its warehouses and stop putting their investment money here. Not until they have closed up and left people jobless.

Unfortunately the greed to steal from big companies and anyone who can be vilified (and that can be anyone and everyone) is easy to sell to people begging the gov to solve all of their problems and for the gov to give them more sweets.

This isnt a tax for fairness. This is a tax against success.

[Anonymous Coward]

"Not until the company has packed up its warehouses"

They would still make a boatload of cash even paying taxes. Bezos & C. would just be a little less rich - still far richer than most mortals - who at least would not have to fill the void with their money.

And where they would open their warehouses? In Bangladesh? Afghanistan?

[codejunky]

Re: "Not until the company has packed up its warehouses"

@LDS

"They would still make a boatload of cash even paying taxes. Bezos & C. would just be a little less rich - still far richer than most mortals - who at least would not have to fill the void with their money."

Now replace amazon with you. I am gonna guess you work in a developed country, and probably work a fair job lets guess a middle wage (no offence if more ofc) then you are rich. Globally you are rich. Even if you earn minimum wage in a developed country you are likely one of the rich. So you can pay more tax, you can take home less, and you can be happy about it?

Your answer should be somewhere between hell no and sod off. You work, you earn, you expect to not be robbed blind because you are successful. We can all be a little less rich. But not many people want to.

[Flak]

Markets & Taxes

Market: In economic terms, Amazon operates in an oligopoly.

-> Cloud Services: AWS + Azure + Google Cloud Services

-> On-line retail: Amazon, ebay, and then some regional players

Typical market forces and behaviours in an oligopoly can be observed, with both markets now so mature that new entrants may find it difficult to achieve scale.

Taxation: It should not be possible for companies to siphon off profits generated in one country (e.g. UK) and crystallise them in tax havens. Countries or economic blocs (such as the EU - no Brexit comments please) need to close loopholes there without stifling the economy. This is an eternal cat & mouse game. If Amazon's worldwide tax averaged 30% a proportionate share should be paid in the UK - not the pittance that has been paid. But that must be based on law - not trying to shame an organisation into paying more than they are legally obliged to pay.

[Anonymous Coward]

it would be reasonable for the Inland Revenue to remove the allowance grace for Amazon

This would require both the British government and HMRC to have a clue and some balls. In what parallel universe is that going to happen? The announced plans are timid, will be fought intensively through the courts, and probably end up being implemented in some stupid way that harms consumers whilst making no difference to Amazon.

You can see a chance the proceeds of the planned tax being dedicated to propping up high streets where consumers have already voted with their feet and wallets. So you and I pay higher prices when shopping on line, and the money raised subsidies Mike Ashley and large, rich property companies.

[Anonymous Coward]

HIgh streets

Round here, they don't really sell the range of stuff that's available from Amazon. And they also open at 10:00 and close at about 17:00, so no chance to shop after work. I can order late afternoon on Amazon and have stuff delivered for "free", to my door, the next day (with Prime) for a lower price that I can get anywhere else (including Amazon Market items).

They do need to pay tax, but if that's "not enough" then the tax laws need to be changed in a way that's fair for all (i.e. not changed to subsidise the high street).

[I ain't Spartacus]

Re: HIgh streets

One idea is to do away with Corporation tax completely. It's one of the easiest taxes to fiddle anyway - and even if they aren't deliberately trying to cheat it's close to impossible for a global mega corp to assign all the costs and profits correctly. Accounting is more of an art than a science at that level, there are so many judgement calls you have to make.

So we'd have to put up income taxes and tax on dividends, of course, to make up for the lost taxes. But then that's who pays corporation tax anyway - shareholders and customers.

Sometimes (probably always) a simpler tax system is a better tax system.

[keith_w]

Re: HIgh streets

How do you tax dividends that are paid to citizens of a different country - if, in fact, they are even paid? Lots of companies don't pay dividends, the shareholders make their money from increases in the share price.

[I ain't Spartacus]

Re: HIgh streets

keith_w,

If companies don't pay dividends - then their share price has to rise - or the shareholders aren't making any money and so shouldn't get taxed. When you realise a profit on selling shares, you already pay capital gains tax. So this tax is already captured by the current system.

You're going to get some changes to where taxes are collected, but then the whole point of this is that companies like Apple, MS and Google are already avoiding corporation tax everywhere. So now at least the taxes will be getting paid somewhere.

[Doctor Syntax]

Re: HIgh streets

"So we'd have to put up income taxes and tax on dividends"

If you have a company selling in country A and sending its profits to country B no matter what level you set for dividend taxes in A they won't collect a penny tax because the dividends are paid in B. You can tax the company's employees in A or you can tax their customers. Once the money's moved to B A can't touch it.

[Steven Guenther]

IP valuation

How do you make a real valuation of the IP the company is "Leasing" from the Irish.

Currently, they make it equal to the profits in the other countries, thus yielding zero profit in that country.

The IP should have a set realistic value. But that requires brains and balls, neither of which any politician has.

[Carpet Deal 'em]

Re: IP valuation

The realistic value of a company licensing its IP to its subsidiary is zero. It might be one thing if it were a joint venture, but there's no reason to charge a wholly-owned subsidiary for inherent use of its parents' trade dress.

[Doctor Syntax]

she would like there to be more public efforts to "demystify" the tracking of people's buying habits online.

What I find most mysterious is why they're so bad at it. Their search throws up a large percentage of false positives and is less responsive to attempts to set search terms that what I was used to over 30 years ago. Then there's the repeat offerings of things which were unlikely to have been repeat purchases.

[mark l 2]

It is easy to bash Amazon for the way it handles it's taxes by syphoning profits of to other jurisdictions. While doing this might be morally wrong it is perfectly legal in the way the law stands. I doubt there are many business or individuals who would volunteer to pay more tax than what they were required to do by law.

A change it the law could fix this but I doubt we will see this happening as MPs and the rich backers who fund the political parties use these schemes themselves to hold funds offshore and have no desire to see their own profits cut.

[robbie rob]

yeah, but...

Insurance companies - have you looked at the firms actually providing the services? A lot of commercial contracts have firms in low tax areas as being the ultimate beneficiary / provider. Check them out.

There are many services related businesses that operate in similar ways, where you have a contract in place, agreeing to pay some recipient in an offshore location.

I dont really see much difference between the tech firms, and services firms, due to the exportability of the contractual entity. And many of the tech firms are only shells, which can be involved in the sale of goods as well; look at Ebay.

No, no me the issue is broadening the tax base. Transfer pricing agreements are all good and well, but these are often negotiated. The ultimate outcome seems to be simply what HMRC or whoever can extract after discussions.

If we make things too difficult, these firms will simply go elsewhere, and the goods will be more expensive for the final consumer, because the opportunity to run as efficient a business as possible, including tax efficiency, will have been destroyed.

This may not be popular, but corporate tax is an inefficient mechanism. I'm surprised it's even used any more, and frankly is an unfair mechanism that only hammers the low-hanging fruit of firms who cannot afford the best accountants. Far better to have some broad-based VAT / consumption tax; everyone has to eat and have a roof over their heads, and no matter how good your accountant is, you still need to buy food and keep yourself+family somewhere.

[DLB045]

Changing the law is close to impossible because the problem is deeper than that.

This is where the law and common sense diverge from reality.

I'm making widget "A". It has sub-components B1, B2, B3, and B4. B1 (etc) has no use except as a sub-component of "A". Ergo THERE IS NO MARKET VALUE for B1, B2, B3, and B4, getting any sort of "fair" valuation is impossible.

B1 is created in Country X1 and sent to country X2. B2 is created in Country X2 by combining B1 with something. At the end you have B3 (which has no defined value) which is programmed with the software B4 (which also has no defined value) and this turns it into widget "A".

For accounting purposes we pretend B1 (etc) has an internal value and pay "tax" on this when transferring stuff between countries, but that's just an accounting fiction. No market means no prices which means no "inflated prices".

You tell me the rules and I'll tell you my actions. However since I get to define how much B1, B2, B3, and B4 are valued, I guarantee that all of the value in the creation process will be done in low tax countries. You force a different set of defined rules for combining B1 (etc) and you're destroying any company/activity for which those rules are insane. Worse, most can STILL game the rules, it will just take a while.

A VAT is pretty much the counter to this, and yes, the result is that companies don't pay tax, they just collect it (note this has been the criticism of taxing companies forever).

[Mark2410]

EU is to blame

Amazon is just complying with the way the EU was set up. That biz pay tax in one location for all and the idea was that all members would "harmonise" their tax levels to be the same. Small countries like Ireland and Luxemburg have long said F that and set low tax rates to effectively steal tax revenue from larger members just as the UK.

Amazon is just doing exactly what the present EU setup is intended to do, funnel a tiny tax rate for the whole EU into Ireland and Luxemburg.

[Anonymous Coward]

How about we use taxes to make big business Financial suicide, the idea is to adjust the rules of the environment to take away any advantage they currently have . loss of profitability for large entities will force them to liquidate Capital, freeing it up for creation of smaler local businesses, who due to less layers of bureaucracy in middle management can react quicker with would more relevance to their local markets and needs of their customers. The idea is to prevent any private entity or faction from Gaining majority market control so as to prevent compromising and stacking of the deck. And to provide essential turn over.

Limit your Influence out of respect for opportunity for others, or be limited more than if you had responsibly handled it on your own, and micromanaged to the point of Destruction,, as your assets are seized and used to provide for others, whose chance for Success was stolen buy greedy over-reaching.

[Anonymous Coward]

This would still allow the compulsively over-ambitious, satisfactionly challenged to still have an outlet for their natural compulsions, while setting limits so that they are safely contained. Provides a return flow the that lets them safely indulge their passions, while still preventing them from acquiring more power than they can resist abusing.