Dear God these people are stupid

Figures published last night by the PAC, show that Amazon sales from the UK amounted to £3.35bn in 2011, with £2.9bn made up from sales of the company’s UK website, www.amazon.co.uk, and the remainder from subsidiary LOVEFiLM and “other business activity” outside of the website.

The figures also showed the company made sales totalling £1.87bn in 2009 and £2.36bn in 2010.

The company has sparked outrage because despite having warehouses in the UK and employing 15,000 people, it drives all of its sales through Luxembourg – which has a lower rate of corporation tax.

Yup. And we\’ve a double taxation treaty with Luxembourg, just as we do with 110 other countries, which says that merely having warehouses, a logistics chain, inside a country does not amount to a permanent establishment which gives rise to liability for corporation tax.

This isn\’t a loophole, it\’s not a dodge, it\’s not tax avoidance. This is specifically written into the law. This is tax compliance.

17 comments on “Dear God these people are stupid

  1. You are, of course, right that many of the usual Guardian/UKUncut suspects don’t know enough about tax law to realise that Amazon are merely doing what the Single Market laws dictate.

    However there is a growing call from many others (see John Kay in yesterday’s FT) that the current tax legislation (where you can HQ yourself in Luxembourg and book all EU sales through there) is no longer appropriate or economically justifiable.

    This doesn’t mean that UKUncut are right and that Amazon are tax dodgers, merely that they are taking advantage of a discredited tax system.

  2. The law doesn’t say Amazon has to have its European base in Luxembourg despite doing almost none of its business there. This is avoidance.

    UKIP’s policy is “to have a medium-term aim of harmonising the rates of income tax and corporation tax”, abolishing employers’ NI. How is that going to work without measures to stop companies relocating overseas for tax purposes?

  3. I think the (EU) law says they can have their European base were ever they like in the EU. If so, they are totally compliant with EU law, they are following the law as written and as intended.

  4. PaulB The whole point is that Amazon is not locating overseas. It is a trader in the EU Single Market and within the 27 soon to be 28 Member States national boundaries no longer exist for trading purposes.

    The current problem is caused by the fact that these 27 (28) nation states have not yet completed the transition to a single economy and thus differential tax systems still exist.

  5. Paul B ‘The law doesn’t say Amazon has to have its European base in Luxembourg despite doing almost none of its business there. This is avoidance.’

    Is there any fiduciary duty on the management of Amazon to minimise tax for shareholders?

  6. “The current problem is caused by the fact that these 27 (28) nation states have not yet completed the transition to a single economy and thus differential tax systems still exist.”

    That is not a “problem”

  7. Paul B>

    So which EU state should Amazon be based in, given that they trade in at least several of them? France? Germany? The UK? They’re all big markets.

    Warwickshire Lad>

    “Is there any fiduciary duty on the management of Amazon to minimise tax for shareholders?”

    We’ve been here before, and you have to be very careful how you define your terms. Management have a duty to achieve the maximum possible value for the shareholders over both the long and short term. That would include not paying more tax than necessary, but what is necessary may be dictated by factors other than the law, such as market forces – if, to take an extreme example, every Amazon customer in the EU would boycott the company if they didn’t immediately start paying tax in the UK instead of Luxembourg, then the management would have a clear duty to move the company.

  8. Dave ‘We’ve been here before, and you have to be very careful how you define your terms.’

    Thanks Dave, but I was asking a question to which I already knew the answer. In my line of work, those are the only questions you ever ask!

  9. @ PaulB

    “The law doesn’t say Amazon has to have its European base in Luxembourg despite doing almost none of its business there. This is avoidance.”

    Yes it is. But it’s avoidance in the sense of ‘structuring so as to take the most advantageous route presented by the law’, as oppose to avoidance in the sense of ‘structuring so as to take advantage of a route never envisaged nor intended by the law’.

    So it’s not analagous to taking out an ISA (which is ‘avoidance’ actively promoted by the law), but nor is it analogous to, say, what the companies in the Channel Islands were doing by using LVCR to avoid levying VAT on sales into the
    UK.

    The fact that the single market is a fucking big elephant in the room when this matter gets discussed.. tells us an awful lot about what’s going on here. It’s all spin, axe-grinding, cheap populism, and/or outright deception.

    The message is that big nasty companies are dodgy tax avoiders, and that’s why your local school is underfunded, and it’s all the tories’ fault. Repeat. Repeat. Repeat. Keep it simple. Repeat it often enough and everyone will believe it… because anything that blames bad stuff on someone else is an easy sell.

    Tax is boring and complicated and anyone who tries to point out the boring and complicated and horribly inconvenient facts can be dismissed as a neoliberal corporate apologist who hates poor people. This debate is a fact-free zone.

    Repeat. Repeat. Repeat.

    And credit where it is due… Richie and UKUncut are playing this brilliantly.

  10. PaulB said “The law doesn’t say Amazon has to have its European base in Luxembourg despite doing almost none of its business there. This is avoidance.”

    Let’s remember that Amazon is an American group.

    So when it is structuring its European operations, what would it do?

    Let’s assume there are no corporation tax differences. Would it set up a sales company in every one of the 27 EU Member States, plus the EFTA ones?

    Probably not. The admin and compliance costs would be high, so unless local regulation pushes them that way, it wouldn’t.

    Added to that, the EU is encouraging foreign businesses to see the EU as a Single Market, so far from being pushed towards setting up in every EU country it is in fact being pushed to set up just in one.

    So even without corporation tax differences, its structure wouldn’t be very different. One company for the whole of the EU. OK, perhaps that one wouldn’t be in Luxembourg, but it would probably still only be set up in one country, paying tax in one country.

  11. Whether Amazon do qualify under the UK-Luxembourg Double Taxation Treaty to be taxed on their UK sales in Luxembourg will depend on the facts, but judging by the tone of their own website, I would say they were sailing pretty close to the wind.

    Article 5 (2) (permanent establishment) reads The term `permanent establishment` shall include especially: (a) a place of management; …..(blah, blah)

    and the website says:

    “Amazon in the UK

    UK Corporate Offices – Slough, Berkshire, England
    Since 1998, our teams have developed a genuinely British site with the same commitment to customers, cutting-edge technology and rich editorial content that has made Amazon.com such a success. Our Slough teams manage all corporate functions, including buying, marketing, software development, sales and legal. “

  12. Tax avoidance is, by definition, tax compliance.

    When avoidance is no longer compliant, it becomes tax evasion.

  13. “The law doesn’t say Amazon has to have its European base in Luxembourg despite doing almost none of its business there. This is avoidance.”

    Yep. And tax avoidance is perfectly legal… ergo, you have no beef with Amazon.

    Rather than sitting around bitching about the evil Amazon, why not take a stab at writing tax law that doesn’t incentivize the sort of behavior Amazon is engaged in.

    Tax law always produces incentives and disincentives… and often the difference between effective tax law and ineffective tax law is how the law manages those incentives and disincentives.

    I suspect UKuncut and the Guardian avoid discussions of how the law can be improved simply because they lack the knowledge to do so.

  14. “Well the Guardian seems to have a particulalry sound knowledge of the law and avoidance strategies – indeed they employ them themselves and run seminars for people who want to.”

    Those would be the adults that are tasked with making sure The Guardian provides an acceptable rate of return for ownership. What we’re talking about here are the mental midgets that write for The Guardian… who between them probably couldn’t run the newroom’s coffee fund without fucking it up.

  15. “What we’re talking about here are the mental midgets that write for The Guardian… who between them probably couldn’t run the newsroom’s coffee fund without fucking it up.”
    Yeah.. Giants such as Will Hutton, who take over the Work Foundation on a commensurate large package, and then run it straight into bankrupcy.. the fucking twat…

  16. Ok Penis Desert

    If the writers at the Guardian are “mental midgets”, it means you are comparing them to some larger mental entities. As Johnnydub accidently attributed.

    Are you the mental entity you are quantifying them against? Who is Teh Giant Mentaller?

    Without those answers I decree you talk cock.

Leave a Reply

Name and email are required. Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>