Amazon gets its tax excuses in early amid rising UK profits – but leaves El Reg off the press list. Can't think why
A charm offensive, or just plain offensive?
Amazon tried to head off negative column inches about its tax-efficient operations in Britain by cherry-picking journalists to brief on its latest financial results days before they hit Companies House.
Last week, El Reg was told Amazon had approached The Guardian, the BBC, and other national outlets to discuss its 2019 figures for the UK ahead of the data being made public. During these briefings, the web goliath highlighted its more flattering numbers. In recent years, the business has come under fire for its hyper-tax-efficient processes.
The charm offensive had mixed results: last Wednesday, Old Auntie didn't rock the boat, though The Graun did. The strategy seemed to be to select certain outlets so that when the profit-and-loss accounts were published on the Companies House website – as happened yesterday – the story would already be a week old.
It's almost as if somebody had a guilty conscience, though to have a guilty conscience, one must have a conscience in the first place.
We decided to wait for the official numbers for Amazon UK Services to drop and become public before we dived in. The tech titan's paperwork, for the year ending 31 December 2019, must have made joyful reading for shareholders, if not so much for tax inspectors.
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A subsidiary of Amazon.com, the purpose of the UK company "is the provision of fulfilment and corporate support services to other Amazon group undertakings." Cloudy wares or anything more specific were not included due to how Amazon channels its revenues around Europe. As an example, AWS UK revenues get reported as part of Amazon Web Services EMEA Sarl. Tax payments are made through its UK branch to British tax collector and Amazon customer HMRC. Not the most transparent of operations.
As for what has been filed, the company recorded £3bn in sales, up 30 per cent from £2.3bn the previous year. Profit before taxation was up 35 per cent, to £101.9m from £75.4m. Tax payments, however, remained almost unchanged, standing at £14.5m for 2019 compared to £14m previously.
Once deferred tax was taken in to account, the tax on profit stood at £6.3m, an improvement on the £1m of last year.
What was not an improvement on last year was Amazon's defence of its UK operations, which was sent some days ago to select outlets and others on request. While the figures submitted to the UK government's Companies House declared £3bn in revenues, Amazon's glossy PR release boasted that all UK operations (including those hidden behind the corporate curtain) actually generated £13.73bn, up 26 per cent from £10.89bn. It also said that its total tax contribution had increased to £1.147bn, up 45 per cent from £793m.
Alas, even that £1.147bn figure is not quite what it seems. By the company's own reckoning, £854m of that were "indirect taxes" and were "largely driven by net VAT due to an increase in sales and employee taxes as the result of headcount growth and wage increases."
Employer taxes accounted for the biggest chunk of the remaining £293m, with corporation tax trailing behind business rates. Trailing by how much is anyone's guess – the company didn't publish a detailed breakdown.
Amazon, which is very happy to use the UK's transport infrastructure when shunting its boxes around, was keen to brag about the 30,000 people it employs in the UK and the £23bn it claims to have invested in the country since 2010.
Others were less impressed by the antics of Bezos' gang.
Dame Margaret Hodge, Labour Member of Parliament, gave the company short shrift, telling The Register: "Another day, another dollar as Amazon's wicked approach to taxation seems to go on unabated.
"The corporation is flush with cash and the fortune of owner Jeff Bezos has soared to make him the richest person in the world. Yet Amazon ducks its responsibilities to UK taxpayers by shifting profits offshore using opaque corporate structures."
Paul Monaghan, head of the Fair Tax Mark campaign group, told us: "Amazon refuses to disclose exactly how much profit it makes and tax it pays in the UK in total.
"Much of their UK income continues to be shunted to Luxembourg, where there is a 'loss-making' subsidiary that is not only not paying tax, but is generating enormous tax reliefs that can be used in the future to ensure that little or no tax continues to be paid.
"Amazon is growing its market domination across the globe on the back of income that is largely untaxed – allowing it to unfairly undercut local businesses that take a more responsible approach."
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Dame Margaret agreed. "While high-street businesses struggle and regular taxpayers pay their fair share, it's deplorable that the wealthiest corporations in the world will move heaven and earth to avoid paying their taxes.
"The only solution is more transparency for corporate taxation. The government must act urgently to implement public country-by-country tax reporting so that we can see where companies are making their profits and if they are paying fair taxes."
"To rectify matters," Monaghan told us, "governments [need] to get together and rip up the international rule book that has been in place for nearly a century, and move instead toward something called 'unitary taxation'."
Under such a system, profits would be apportioned to each country for taxation based on where the economic activity actually takes place. "For Amazon," he said, "this would likely see a significant increase in the corporation tax paid in the UK."
Unsurprisingly, vested interests and a number of tech giants are keen for that not to happen.
Potential reform on international tax rules is indeed in the works, with discussions being held by the G7, G20 and OECD, though a consensus may take some time. As a result, the UK instigated a two per cent tax of digital corporations's revenue. Amazon offset this by charging third-party suppliers that use its marketplace a two per cent increase in fees.
Rival eBay took the tax charge on the chin, perhaps hoping to carve out a competitive advantage.
In the meantime, "the UK's tax authorities also need to be much more assertive," said Monaghan. "We've yet to see the claw back of tax avoided in the past like we have seen in France and Italy in connection with Amazon."
A spokesperson at Amazon sent us a statement:
The UK has now become one of Amazon's largest global hubs for talent and this year we announced plans to create 10,000 new jobs in the country by the end of 2020, taking our total workforce to over 40,000.
Corporation tax is based on profits, not revenues, and our profits have remained low given retail is a highly competitive, low margin business and we continue to invest heavily.
The company did not comment on the taxes its higher-margin Amazon Web Services operation pays. The Reg would like to make clear that Amazon operates within the law when it comes to paying its dues – though, ethically, it stinks. ®