Talking about Amazon’s tax bill and how to screw them on it.
Pity he entirely misses the major point at issue here: the standard OECD double taxation treaty. Which states that the use (or even ownership) of a wharehousing or logistics chain simply does not lead to the creation of a permanent establishment.
“wharehousing”: Freudian slip?
You are aware that the OECD, the G-insertnumberofchoice, and the rest of the neoliberal capitalist bastards are making efforts to close this particular loophole, aren’t you?
Bin G
Well then, if and when they do close it, the Law will have changed and Amazon’s tax profile with it. In the meantime the Law is as it is. And..well..stuff flows from that doesn’t it.
What the hell is “introducing tax risk” anyway? The nearest we get to any adult criterion here is, “taking tax advice”. Other than that we have this clown referring to a “hypothetical” example whilst pointing at Amazon.
This gives me an idea for an updated Hammer Horror movie starring Richard Murphy as the witch-smeller. He finds that young girl in the woods and shouts “In the hypthetical event of THIS gorgeous young girl with the magnificent chest being found to have fead blood to her pussy, we’ll burn her, yes HER”
Umm, in the article the writer states,
“And having myself, acting as a tax adviser, set up a structure very similar to Amazon’s, albeit on a much smaller scale, I can assure you that it was my suggestion to put the transacting entity in a tax haven.”
So is the writer saying it’s fine for him to do it, but not Amazon or that Amazon are wrong to take skilled professional advice?
Seems a bit weird to me but then again I’m not a financial wizard of any sort.
It’s alright Allen, neither is he.
For those who aren’t aware, “Ritchie’s mate” shouldn’t suggest he has half baked opinions like RM. If anything, you might argue he overthinks things.
Tim: I think it’s unfair to state he forgot the OECD treaty – he’s arguing that it doesn’t apply. The OECD treaty says that if a non-resident (Amazon Lux) has a presence in the UK limited to a warehouse, it’s not taxable. Agreed. And Amazon say that’s the case, because their other UK functions sit in a different legal entity (Amazon UK). What DQ is saying is that they are not, in substance, different legal entities. And a UK court has said that this is true as a legal matter, at least to the extent that the UK and Luxembourg entities can be jointly liable for any torts.
Ironman: If you read DQ’s paper linked on his blog, he tries to put a scientific, objective definition on “tax avoidance” by linking it to tax risk (i.e. the risk that your tax bill will be higher than what you claim in your return). Some might call this overthinking the matter, but I would say that if we want a reasonable discussion we need a better definition of tax avoidance than “anything that Margaret Hodge dislikes”.
Allan: He’s not saying the structure is wrong, he’s arguing that Amazon has not followed the structure. i.e. putting activities in a tax haven can work, and he’s done it himself; claiming you’ve put activities in a tax haven when you haven’t does not work. I think it’s probably a legitimate interpretation to have, if a little fringe.
The concluding paragraph of the case in question, Cosmetic Warriors Ltd & anor v Amazon.co.uk Ltd & anor, relates to the tortious act complained of – that Amazon’s doing of the infringing acts is mere facilitation, is unreal and divorced from the commercial reality of the situation.
The Deputy Judge doesn’t say (or even suggest) that:
(a) Amazon Luxembourg and Amazon UK are the same entity; or
(b) the proposition that they are separate commercial operations is “wholly unreal and divorced from the commercial reality of the situation”.
He’s not saying anything of the sort. He’s simply saying that in the commission of this particular tort, the entities have acted jointly.
Further, nothing in the analysis of Amazon’s structure and its effect on its UK tax liability turns on whether Amazon UK or Amazon Luxembourg co-operate. It goes to the heart of the structure that Amazon UK relies on Amazon Luxembourg to tell it where to distribute the goods; Amazon UK is, after all, simply storing and dispatching goods.
It stands to reason that there is sufficient connection between them that the Deputy Judge would find they acted together – even though the business is actually being carried on in Luxembourg and no profit arises in the UK.
To suggest that Baldwin QC’s comments support the contention that Amazon.co.uk and Amazon’s Luxembourg SARL are essentially the same entity, or that the entities are not distinct, is clearly wrong. In fact, the observation that the UK and Luxembourg entities acted “jointly” could be viewed as support for the reality that the operations are clearly separate; if they were the “same” entity for all intents and purposes, there would have been no requirement to find that they acted jointly or in concert.
One might try and argue that Amazon UK and Amazon Lux are acting in partnership, and that the partnership is trading in the UK, so the profits of the partnership should be split between the two on an arm’s length basis.
That would require quite a re-write of the contractual position, though, and might have wide ramifications for genuine third-party situations.
The point is that the UK simply doesn’t apply the enterprise doctrine. Until it and the rest of the world does (i.e. moves away from the separate entity approach) there’s a lot of clutching at straws.
So in the meantime despite what the mob want, amazon is acting legally?
Hey look, hundreds of thousands of companies that currently pay UK corporation tax are not also paying French corporation tax – perhaps they need to be forced to pay less UK tax and pay the required amount French tax because the French buy the goods. Same argument used about these overseas companies?
To be clear, I’m not saying DQ is correct. However, its worth noting that the primary reason businesses have historically used separate legal entities was to limit legal liability – all groups act as a single business to some extent, but it’s quite an extreme and rare set of facts to say you can ignore the limits on legal liability.
The question is then not whether they are factually the same entity, but whether tax law should effectively treat them as if they were (even if only to a limited extent) in the same way that tort law does. I don’t know what the right answer to that is – my instinct would be that it’s probably wrong, but a court could well agree with it.
Worth noting also that law is supposed to be interpreted while keeping the purpose of Parliament in mind, and that you shouldn’t restrict yourself to a literal interpretation. That in effect gives courts some discretion in how they apply old law to modern fact patterns.
David Quentin wants to make anyone who either follows the letter of the law when Murphy thinks that Parliament meant something different or who tries to follow what Parliament meant when the letter says something different to be liable to a swingeing fine.
So if any tax rule is ill-phrased *everyone* should be fined!
Manhattan Brit
He may be trying to link tax avoidance with creating the risk that your bill is Higher than on your return. But I’ll ask again; what criteria could be applied to determine a taxpayer had done that? This isn’t about your tax bill actually Being higher than your return; just you creating the RISK. And he rounds it off by saying it will only apply if your bill IS actually bigger than your return. MAYBE what he’s getting at is a general anti avoidance rule.
He hasn’t over-thought this, he really hasn’t.