The UK sales figures Amazon wants kept hidden
By Nicole Kobie
Posted on 26 Nov 2012 at 15:46
Amazon posted sales of £3.4bn in the UK last year, according to "confidential" documents released by the government as part of an inquiry into tax avoidance by multinational firms.
Two weeks ago, Amazon's director of EU public policy Andrew Cecil was grilled - alongside executives from Starbucks and Google - by MPs over the online retailer's tax structure.
After lambasting Cecil as not a "serious person", the Public Accounts Committee requested he supply written answers to questions regarding Amazon's tax structure and how much money it makes from UK operations.
Given the non-public nature of this information, we respectfully request confidential treatment
That data has now been supplied in a letter to the PAC - which has been posted online despite Cecil stressing it was shared on a "confidential basis".
In the second letter, he requested: "Given the non-public nature of this information, we respectfully request confidential treatment." It's unclear whether the PAC erred in posting the information online or merely ignored his request.
According to the letters, Amazon last year made sales of £3.351bn, with before tax profit of £74 million. Of that, £2.91bn was directly via the Amazon.co.uk website, while the remaining £441m was from "subsidiaries such as LoveFilm and from other business activity outside of the amazon.co.uk website".
From the £2.91bn sales from the UK website, Amazon contributed £416m in VAT, but no corporation tax. Last year, Amazon.co.uk Ltd - not the website, but a "fulfilment company" - paid £1.8m in corporation tax on revenue of £207m.
Sales of other media, such as ebooks and MP3s, are taxed in Luxembourg, where the EU side of the firm is based.
The numbers reveal the growth in UK website sales, leaping from £1.865bn to £2.910 in only two years - and that doesn't include digital content.
Indeed, it's worth noting that the £3.351bn Amazon made from UK customers last year is almost £1bn more than Google's £2.584bn in revenue from UK buyers. Google bills its ad sales via Ireland, with Google UK posting revenue of £395m and corporation tax of £6m in 2011.
How Amazon works
Cecil outlined how Amazon's corporate structure works along similar lines to other firms, including Google. The business has three strands - IP licensing, website ownership and digital sales.
The intellectual property (IP) behind Amazon's European websites, including the ".co.uk" property, is held by a firm called Amazon Europe Holding Technologies, based in Luxembourg but owned by a trio of US firms - Amazon.com International Sales, Amazon.com and Amazon Europe Holding. "This is how EU entities pay for the use of Amazon's technology and intellectual property, which is primarily developed in the US," he said.
That means licensing fees for that IP are paid from the European sites to the US business. Cecil suggested that amounted to £151m for UK sales last year.
The actual Amazon.co.uk site - as well as other Amazon sites in the EU - are owned by Amazon EU Sarl, a Luxembourg-based company.
Meanwhile, digital products, such as ebooks and MP3s, are sold by Amazon Media EU, which is owned by the Luxembourg-based Amazon EU Sarl. The third-party seller system, Marketplace, is operated by another Luxembourg-based firm, Amazon Services Europe Sarl.
So what's actually operated in the UK? Amazon.co.uk Ltd is not the website, but the fulfilment arm of Amazon's business. It's based in the UK, and "earns a margin on its operating costs for providing services performed in the UK to group companies, primarily to Amazon EU Sarl," Cecil said.
Those services include logistics, customer support, accountancy, tax, legal, human resources, "localisation and similar back office services", merchandising and marketing, and "purchasing assistance". Amazon.co.uk Ltd doesn't, however, actually sell the products.
No worse than Apple and the others.
Unfortunately EU rules pretty much require companies to avoid tax this way. Directors who do not take advantage of such obvious tax breaks would be dismissed very quickly.
By tirons1 on 26 Nov 2012
All multi-nationals do this
Microsoft does this, Google does it, every multi-national fiddles taxes legally - meaning ordinary workers have to pay higher rates of tax or suffer cuts in services. The problem has been around since the 1970s, but the digital age has made it worse.
The reason they can get around paying tax is not because of the EU, it's because of International Tax Treaties that the UK signed long before it joined the EU. Uninformed comments really don't help.
By SwissMac on 26 Nov 2012
SwissMac's right (for once....)
OK sorry about the snarky headline, but who could resist?
Whilst its fun, and apparently quite nutritional to lambast the "EU" for every ill, it's rarely accurate. The sad truth is that all Western governments are utterly in thrall to Big Capital. International Tax regulations are formulated by the rich & powerful in (no longer) smoky rooms in Davos, and Governments simply implement them.
So if you've got to blame anyone, blame our pathetic, spineless and ineffectual political "leaders" and ultimately ourselves for voting for them.
By wittgenfrog on 26 Nov 2012
Your response is somewhat unfair. If the current EU rules were not part of the problem why would the EU be proposing rule changes to reduce tax avoidance?
VAT for example is charged to the company's country of residence, rather than the purchaser's. This loophole will be plugged in 2015.
The EU is also proposing a raft of measures to make corporate tax avoidance more difficult.
Clearly large sums of money will be transferred to politicians in an effort to suppress such measures. Unfortunately the evidence of the past is that lobbying works.
By tirons1 on 26 Nov 2012
Having their cake and eating it ...
When purchasing from Amazon I've taken to comparing prices across their European sites. Often you'll make significant savings by purchasing from another country. Amazon make this easy by allowing the same account to work on all sites, but hard by having each site available only in the native language - so make use of Google Translate. Often shipping costs will eat up most of the savings, but it is still surprising how much cheaper some items are, particularly on the German site.
If Amazon is paying all VAT at Luxembourg rates, and essentially all corporation tax at US rates, what excuse do they have for these substantial variations?
If anyone is looking for a business opportunity, a website that compares prices across all Amazon local sites would be a great idea.
By JohnAHind on 27 Nov 2012
A way to sort it ?
How to stop this from happening?.Quite simple really.The government needs to set out a new law called the point of sale levy.All companies are charged on gross valued sales within the UK borders, replacing Corporation Tax which would then be scrapped.
Try and get around that one Amazon et all...
By Jaberwocky on 27 Nov 2012
John, pricenoia.com will do the price comparison between all the Amazon stores.
By NeilCFD on 27 Nov 2012
It's all rather pointless berating companies for making use of legal loopholes. They are companies whose sole purpose is to make money - they are always going to make use of any available loopholes.
What is needed is a tax regime and associated laws which don't allow them to do it!
By valeofyork on 27 Nov 2012
Luxembourg 4 England 0
Luxembourg lies as the nexus of this tax fraud (and others like it).
By popeye91 on 27 Nov 2012
How many people buy English books on the continent via the co.uk website? I do. I have just spend several hundred pounds for books that are bought from Amazon Luxembourg and shipped to France. Why should I have to pay UK VAT on that?!? And what is happening to the SINGLE MARKET?!?
By waaaa2 on 27 Nov 2012
The only fraud is the one being put forward by the British politicians.
By waaaa2 on 27 Nov 2012
Not always easy, but I try to avoid dealing with the likes of Amazon by using the UK based alternatives known as bookshops. Support local traders when and where you can, rather than enrich faceless big business overseas.
By robgwc on 29 Nov 2012
The biggest tax fraudsters are governments
The biggest tax fraudsters are governments
The tax system ("fisc" in French) is about sharing the public expenses between citizens, some having to make the expenses, the others having to pay the 1st ones for this. Theoretically fraud can happen as well in some citizens paying less than due, as OTOH in government requiring more than due; actually Fraud happens most often in government taking too much, while swapping the roles and hiding its own turpitudes by dumping them on citizens, which is easy since the government has always full control (no matter the variations in details) over the medias hence over its own image.
In this case we have, on one side companies (Amazon, Google, Apple, Samsung, ) that make their money by working hard bringing useful goods and services to customers, on the other side governments that make theirs by plundering the 1st ones. The worst being EU, then France, UK, etc. Those companies are full right when trying to escape the ransom.
Versailles, Thu 29 Nov 2012 09:16:00 +0100
By MichelMerlin on 29 Nov 2012
vat on books
Nobody pays VAT on books in UK, every fule kno that.
And why you should pay in the UK (on CDs for example) is that if you don't pay at the checkout, the only other place you could be taxed is by customs at the border, which would be an utter pain.
By shimself on 29 Nov 2012
Barking up the wrong tree
popeye91 hits the nail on the head. I wish politicians and the media would stop blaming companies and individuals and turn the spotlight on the cause of this problem: tax-havens.
The G8 could at a stroke close down tax-havens by introducing minimum levels of tax and disclosure. Failure to comply would result in economic sanctions and travel restrictions. End of problem. The G8 are incentivised to do this because they all have reasonable levels of corporation tax and disclosure, and are losing out because of these parasites.
So politicians are entirely to blame for this. They are at best negligent in not closing down tax-havens and secrecy jurisdictions, at worst thick as thieves with global elites and corporations to help keep their wealth hidden and untaxed.
Ask not why Amazon aren't being charitable in giving more tax than the law requires, ask why our international representatives aren't putting this top of the agenda at the next G8 summit.
By brendan on 29 Nov 2012
1. None of these companies has done anything illegal.
2. All of them have paid the tax due, in the relevant tax jurisdictions.
3. Politicians make the tax rules, and are whining that businesses are abiding by those laws - stupid, stupid, stupid!
4. Check out Margaret Hodges' tax avoidance with Stemcor - staggering hypocrisy!!
5. If Amazon pays more tax, they will simply pass that cost to us. How does that benefit me? Oh, it doesn't.
6. FFS, will people grow the f*ck up and stop bleating about perfectly legal mechanisms for reducing tax liabilities?
7. Politicians lecturing others about morals? Yeah, right...
By Lazy_Gun on 29 Nov 2012
Artificial constructs to avoid tax
These may be legal, but they are highly artificial constructs to avoid tax. The end result is that us wage earners have to pay more tax, and 'pure' UK companies face unfair competition and go out of business.
It is certainly a mystery as to why the government doesn't act to stop this.
By peteg on 29 Nov 2012
This is not the fault of Amazon, Google, Starbucks etc. Though unethical.
It is the fault of HM Government amateur legislation and HM Revenue and Customs amateur and lax behaviour.
They should have been aware of these tax avoidance loopholes years ago and should have moved to close those loopholes years ago.
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