Nils Pratley on Amazon\’s tax

As we report, Amazon is employing staff in Slough to negotiate deals and contracts with UK publishers. How can that not be considered an activity established and carried on in the UK?


Is there a tax system at all that considers purchases as a taxable event for corporation tax purposes? I sometimes buy stuff in Russia: does that mean my company should be liable for Russian corporation tax? I think not, eh?

14 thoughts on “Nils Pratley on Amazon\’s tax”

  1. Alright, let’s make something clear: I’m not Margaret Oppenheimer and I’m not Richard Murphy. I have no intention of demanding a morality from citizens, private or corporate, that the law doesn’t require or which I wouldn’t require from my favourite newspaper.

    I also know and understand the DTAs and the OECD model on which they are all based.

    That said, your Russian analogy might not stand up here. You might go and buy things in Russia, but you’re not there. The accusation being levelled at Amazon is it is indeed here. The point about a trader buying something is he is then able to sell it on at a profit. If a UK trader (for that is the accustion) buys something in the UK and then sells it on at a profit, well then, that’s a UK profit and UK tax is due.

    It all depends upon the facts, however, and I do not trust those levelling the accusation. So I reserve judgement.

    P.S. Regarding another post: I’m not so sure about Ukranian women, completely sure about Russians; Latvians: OMG, heaven on earth!

  2. Ironman: But Amazon is not here either. All it has are warehouses, which are under the double taxation treaty totally transient operations.

    It would be like Tim visiting Russia to collect said scandium chunk, or hiring a broker or driver to help him do it.

    Where are Amazon’s servers located? Because that’s really where the online transactions are occurring in a physical sense.

  3. Purchasing, like warehousing, is normally specifically excluded from the definition of “permanent establishment” in double tax treaties.

    PE is all about the sales, really. Which to my mind is the wrong approach in many cases, but at least it’s simple and consistent.

  4. Oxonymous

    The accusation has moved on. It is now that there is indeed a permanent establishment in the UK, by virtue of permanent employees taking decisions and conducting its business in the UK. Some of their suppliers appear to be saying “we do all the negotiations with permanent UK staff and then the contract is signed by somebody in Switzerland”. If a UK company is buying the stuff, then the only way a Luxembourg or Ireland company gets to sell it is if the UK company first sells the stuff to it.

    As I say, I am disinclined to trust those drumming up the accusations, but the facts will out. Tim’s case is clear and may or may not be the same as Amazon’s: he is based in Portugal, he goes to Russia to buy his stuff, but does not stay there.

  5. Ironman>

    Yes, whether a multinational company has a permanent establishment (in the strictest sense) in some country where it does some amount of business is a grey area. To deal with that, we made laws and trade agreements about the point at which some company is considered to have a permanent establishment.

  6. But then we always assumed that the warehouses employed people didn’t we? And isn’t buying crap to keep in the warehouse part of the function of a warehouse?

    Even if that’s rubbish and they’re blatantly dodging tax, I’m not going to complain, because as soon as they move onshore the prices go up by 20%.

  7. May I recommend this reading from February 2013 as a part of everyone’s research into tax avoidance. The author in question, Mr Richard Murphy, Tax Expert and Economist, won’t censor you for using Amazon and draws an interesting distinction between respecting choice and hyprocrisy. Apparently it isn’t hypocrisy to sell your books through the same evil bastards you’re denouncing. Just like it isn’t hypocrisy for a newspaper to condemn the same actions in others that it itself is engaged in.

  8. @Ironman

    The Luxembourg company can quite happily do the buying in the UK on its own account without there being a PE – there’s no need for a UK company to be involved.

    The problem is that when the PE rules were written there was no realistic prospect that a non-UK company could profitably buy in the UK and then sell *to* the UK without doing that selling *in* the UK. So the rules never covered that position: why legislate for somethign that would never happen? But the internet now allows it: you can stand in Luxembourg and sell to the UK quite easily. So the rules are no longer appropriate, and ought (IMO) to be updated.

  9. Pellinor

    Regarding the rules: yes, agreed. We have just been discussing this in the office. The conversation is focussing on where the goods are exchanged rather than where the server is based. it is also worth noting the objection of physical retailors here.

    I also agree in principle on your distinction between purchasing and selling. However, in preactice it remains difficult to see how the purchasing and sales decisions can be geographically separated out as Amazon is trying to argue.

    As I say though, the facts will out here.
    As i say

  10. Ironman,

    I think purchasing and sales decisions are likely to have some link, yes, but I don’t think they’ll necessarily be geographically linked. Working in large organisations, I’ve even dealing with members of the same department in the same building is often done over email, phone or messaging, rather than any sort of meeting up.


    Mail order, yes, that could work, and has in the past been very big business. But in practice I don’t think it’s been a cross-border business, even though in theory it could have been. Apart from anything else, there’s postage to pay on every order that goes in as well as on the deliveries coming out. If say Littlewoods required people to post their order forms to Luxembourg, then I think they’d find an awful lot of people would have been put off by the excess postage – and the extra time, too. With a post-based business that’s a strong driver to have the sales operation located in the country of the customer, that doesn’t apply to an on-line system.

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