Usual Guardian nonsense:
Amazon.co.uk, Britain\’s biggest online retailer, generated sales of more than £3.3bn in the country last year but paid no corporation tax on any of the profits from that income – and is under investigation by the UK tax authorities.
Quite. The company is based in Luxembourg. So, it pays corporation tax in Luxembourg, not the UK.
The Guardian asked Amazon why it paid no UK corporation tax on the £3bn it takes out of the economy.
Eh? Supplying things that people want is taking money out of the economy now? Seriously, have we become again so mercantilist that specie flowing overseas, imports, is to be regarded as shrinking our economy?
Instead of, you know, the correct view which is that imports are the whole fucking point of trade? That Johnny Foreigner can provide us with what we want to consume better and cheaper than our neighbours can?
Richard Murphy, of the Tax Justice Network, said rewriting tax rules to prevent arrangements such as those used by Amazon.co.uk would be a huge task. \”The key issue is, what is sold here and what is sold \’into\’ here? The answer is to deem distance sellers [as] resident in the UK with regard to their sales made here. That would be a big issue to take on.\”
Ignorant tosspottery. For the purpose of booze and fags taxes for example distance sellers are already deemed to be resident in the place where delivery takes place. The problem is much deeper than that. It\’s that it\’s built into the EU Constitution that a company (or individual) can sell something to anywhere in the 27 EU countries and then pay profits (or income) taxes on where they are resident, not where they have sold to. This is part of the very foundation of the Single Market.
You\’d have to rewrite the Treaty of Rome to get rid of this: good luck with that.
But you knew that our national tax expert would get this wrong, didn\’t you?
Did we ever stop? Why then have we never ceased to hear about something called “the balance of payments” and about how Something Must Be Done about it? Those foreign johnnies stealing our money with nothing but goods and services in return, the bastards.
Murphy is a fuckwit. That paragraph is properly insane.
But the rest of the piece is legitimate. Not because Amazon’s done anything legally or morally wrong – this isn’t a Vodafone brass-plate tax dodge, Amazon really do have all of their European senior managers and strategists and ‘controlling minds’ in Luxembourg.
Rather, because most people without any interest in tax-wonkery would naturally believe that Amazon.co.uk was a British subsidiary of a US company, largely making money in the UK, employing people in the UK and paying tax in the UK (say, like Ford or Vauxhall used to be), rather than a Luxembourgeois company that pretends to be British when selling to Brits on the Internet.
Many people won’t give a stuff about the distinction, which is fine, but many do – and as long as that solely affects their buying choices and recommendations to others rather than calling for mad new laws, then that’s entirely their right and providing them with greater information is a good call.
Of course the flip side of the single market is that London can have the majority of banks and financial services and provide those services across Europe and the profits from providing those services are taxed in ….. the UK.
Seem like a fair deal to me.
unless of course you think that all those profits from eurobonds and capital raising ought to be taxed somewhere else. What would that do to the deficit I wonder.
Of course, this is why in a globalised economy taxing businesses makes even less sense than it did before. Much easier to tax citizens, who are a lot more physical and in a particular place and unitary in nature; that is, I cannot be simultaneously in France and in England. It would be relatively simple to say, everyone must choose a tax domicile, pay tax and receive services in that domicile, and if you pay tax in Luxembourg you’re not a British citizen so you don’t get an NHS kind of thing.
Tax incidence is discussed at great length on this blog, but there is one simple fact about it; only individuals can actually pay it. So let’s just have a percentage-with-allowance income tax, abolish every other tax, and be done with it.
Looks like they have a permanent establishment in the UK and should pay UK corporation tax on their UK-scource income to me.
Even if you buy Amazon’s claim that the website and warehouse are separate businesses, then the warehouse is making a profit margin of about 0.15% – looks to me like transfer pricing abuse.
Jonathan Moore
Let’s say we have £2.8b of UK sales which the the UK warehouse must deal with.
Assume average order value is £25?
That’s 112m orders, which the UK co is fulfilling for £147m.. or £1.31 each.
Not sure if that UK turnover figure would include the postage costs of the fulfilmt (i.e. does UK co need to do the warehouse thing and pay the postage from that £1.31).
Does that sound realistic? We know from the Guardian that UK Co had a £1.9m tax bill for 2011.. which means that, probably, there was a profit of (say) £6-7m on the business. That seems a pretty good return on £147m of warehouse-monkeying absent of a competetive environment.. which indicates that the transfer pricing might not be too skewed.
For a logistics business, the value of the goods are irrelevant (well, except that you need more security for gold than cement, but YKWIM). If I post you a cheque for a million quid, then it’s hard to claim that the Royal Mail’s half-a-ten-thousandth-of-a-percent share of that is a pricing abuse…
IanB, I agree with you about taxing businesses, but I would choose a different solution:
Much easier to tax citizens, who are a lot more physical and in a particular place and unitary in nature; that is, I cannot be simultaneously in France and in England.
Replace “citizens” and “I” by “land” (and “who are” by “which is”), and you will have an even simpler tax system.
Jonathan Monroe: With LVT, we would tax the land the warehouse sits on, and the land the data centre sits on (if it is here too). It is then irrelevant how they do their internal transfer pricing.
The LVT has the advantage of being simple, and the disadvantage of being rather silly.
…rather than a Luxembourgeois company that pretends to be British when selling to Brits on the Internet.
Quite. I’ve spent a few hundred quid on Amazon.co.uk through my Kindle without being resident in the UK. Why should Amazon pay UK tax on the profits?
Consider a hypothetical UK company which only sells its goods abroad. It sells its goods to 50 countries worldwide. Does Murphy believe that profits on the sales of these goods should be paid in all 50 states, presumably in proportion to the percentage of sales made in each state?
Rob
We know from the fuss about Barclays that profits earned overseas by a UK business should be taxed in the UK. We now know from the Amazon fuss that profits earned by an overseas business in the UK should be taxed, er, in the UK.
It’s all very simple, I don’t understand why you’re having trouble with it.
“a Luxembourgeois company that pretends to be British”
I ordered some things from Amazon the other week, and it said clearly that it was a Luxembourgeois company before the order was finalised.