The UK sales figures Amazon wants kept hidden

26 Nov 2012
Amazon Kindle Fire

Public Accounts Committee letter reveals how much money Amazon makes from UK consumers

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.

The documents Cecil submitted to the PAC can be viewed here and here.

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