This is interesting about Amazon

I wonder how much it will actually change?

Amazon has become the first technology company to abandon controversial corporate structures that divert sales and profits away from UK in the face of a clampdown imposed by George Osborne.

From the start of this month the online retailer has started booking its sales through the UK, meaning resulting profits will be taxed by HMRC. The group made $8.3bn (£5.3bn) of worldwide sales from British online shoppers but for 11 years all these internet transactions have been booked in Luxembourg.

A spokesman said Amazon was “now recording retail sales made to customers in the UK through the UK branch. Previously, these sales were recorded in Luxembourg”.

Being the cynic that I am I can’t see it increasing their tax bill very much. On the grounds that if it had they wouldn’t be doing it.

The company said: “We regularly review our business structure to ensure that we are able to best serve our customers and provide additional product and services. More than two years ago we began the process of establishing local country branches of Amazon EU Sarl, our primary retail operating company in Europe.”

Sales are still being recorded by Amazon EU Sarl, a Luxembourg-registered company, but – crucially for tax purposes – will be booked in a UK branch of that company, for which a tax return must be filed with HMRC.

Yesd, but there will still be an entirely righteous royalty payment to be made from the UK company to the main, or Luxembourg or wherever, for the platform, the brand and so on. Something which, as long as it goes intra-EU, is not taxable in the UK.

5, 7%, wouldn’t seem out of order there. And I doubt their net margins are that high. I can imagine (but obviously don’t know) that this will make sod all difference. Which will be interesting in a year or two when we see their accounts and tax bill. Because if it doesn’t make much difference then Margaret and Ritchie and all will be shown to have been blowing smoke all these years.

A tecnial question: does bnooking the sales through a branch really have the same effects as the sales being by a UK co? Or is there some wriggle room there on things like royalties etc?

11 thoughts on “This is interesting about Amazon”

  1. Perhaps they’re planning to expand their R&D operations in the UK. This cost centre would neatly offset any profits made in sales.

    Great news for those working there: “Quick, we have to spend £1.7m before the end of the financial year lest it fall into the taxman’s thieving hands: who wants to come on a corporate team-building trip to Vegas?”

  2. Yes Amazon will pay very little in the way of corp tax (as they make hardly any profit)

    But it will shut up the muppets that say “we can fully fund any socialist adventure” if they just tax the multinationals “properly”

  3. Yes, applying the Separate Entity pronciple a branch is charged as a company would be.
    As you and Flatcap Army point out though, the actual or imputed royalty payment added on top of very small margins might mean very small profits and very little, if any, tax.

  4. More likely that Amazon have realised that the days of rapid growth are coming to an end and they are now established as a fixture that will have to start paying dividends to shareholders. That requires repatriation of profits and that means paying US taxes on foreign income. Paying a little tax at the lower UK rate won’t hurt because the taxes paid will be creditable against the US tax on the repatriated earnings.

  5. I dunno Alex. Logic would suggest you’re right but a family member of mine is supplying thousands of tonnes of steel for several enormous new Amazon warehouses so they seem to have plans to expand further.

  6. Well, if they are booking sales, they must also be booking cost of goods sold and other expenses.

    That means instead of charging a logistics fee to Luxemburg Amazon which must exceed that actual cost in order to provide a profit to tax, that logistics fee will not be charged and the logistics cost will be applied to the UK sales.

    That will save some tax.

  7. There is a reason that despite being 6 years younger than him, Jeff Bezos is a billionaire while Richard Murphy is…not!

    Bezos is protecting his market share from any possible damage if Murphy et al. try a consumer boycott because of “tax dodging”. He is making the right business move from a distribution efficiency viewpoint while at the same time leveraging it by framing it as a move to pay more tax in the UK. For a more detailed backgrounder on why look here http://www.quora.com/Why-doesnt-the-UN-deny-membership-status-to-tax-haven-states-if-they-are-considered-the-major-sources-for-money-laundering-mis-invoicing-and-other-illicit-money-flows/answer/David-S-Lesperance

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