The economy of Luxembourg is about to shrink by a few billion pounds, with Amazon bowing to UK pressure and announcing it'll book UK sales through its British branch.
The Wall Street Journal reports the change began on May 1. The Guardian says Amazon is moving in response to the UK government's diverted profits tax, which slaps a 25 per cent tax on groups routing profits overseas. By booking sales in the UK, rather than Luxembourg, Amazon will avoid the diverted profits tax, and may cough up some extra corp tax in Blighty.
For the past 11 years, the retailer's sales in the UK have been booked through Luxembourg, which The Guardian reckons may have amounted to £4.71bn in 2013.
Of course, corporation tax isn't paid on revenue: it's paid on profit.
Although Amazon attributed that aforementioned £4.71bn of sales in 2013 to customers in the UK, its Amazon.co.uk Ltd wing filed accounts recording just £449m in revenue for that year, and paid £4.2m in corporation tax to Blighty's HMRC. Perhaps booking more sales through the UK will reveal a fatter taxable profit for Amazon.co.uk.
However, Amazon tends to make relatively little or no profit, leaving little to be taxed.
Speaking to The Guardian, Amazon spun the change as a customer service strategy under which its Amazon UE Sarl subsidiary will now start setting up local country branches.
As well as reporting its UK revenues, Amazon is breaking out its income from Germany, Italy and Spain.
The move might also give chancellor of the exchequer George Osborne a stick with which he can beat the likes of Google and Facebook.
Under the diverted profits tax, target companies have to self-report any income their send offshore, and defend the practise from Her Majesty's tax collectors. ®