Those tax dodging swine at Amazon!
GRRR! Amazon! Coming over here, making vast sales, and not a penny of tax do we see out of them. Or something like that. You know, all they’re doing is providing people with what they want, cheap, and where’s the public value in that?
Unfortunately the Guardian seems to be running their corporate tax pieces on boilerplate language these days. For they tell us that Amazon doesn’t pay tax because:
Amazon’s mounting reserves are likely to fuel demands for reform of UK tax laws. The retailer generates an estimated 10% of its worldwide revenues here, but paid just £2.3m in tax in the most recent three years for which figures are known.
The company’s cash savings ballooned from $3bn at the beginning of the quarter to $8bn by 31 December, boosted by a £3bn fundraising in November. Money held in short term investments increased to $3.4bn.
Like other US technology companies, Amazon has put this money out of reach of the tax authorities by managing its European operations from Luxembourg. Profits collected in the UK and other major markets are funnelled out via a network of subsidiaries, in the form of royalty payments for intangibles such as use of the brand or technology developed inhouse.
Whatever Amazon’s doing in Luxembourg makes no difference to how much UK tax it does or should pay. The reason it pays almost nothing in the UK is that the law says that it should pay almost nothing here.
When you buy you buy from Luxembourg. So the taxs, whatever it is, is collected in Luxembourg. It gets shipped to you from a UK warehouse, yes. But that doesn’t make tax payable in the UK. For here’s the international treaty we have with Luxembourg:
(3) The term `permanent establishment` shall not be deemed to include:
(a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
If you don’t have a permanent establishment in a country then you’re not liable for corporation tax there.
This isn’t even tax avoidance. It is expressly written into the law that Amazon should not be paying corporation tax in the UK. Just as a UK company using a warehouse in Holland (as I do sometimes) does not pay corporation tax in Holland.
It does get better: Michael Meacher is touting a new bill that will get rid of all of this. Or so he says:
(2) Arrangements are not tax arrangements if—
(a) the arrangement was specifically permitted by legislation or regulation
relating to any of the taxes referred to in section 1(3) or is clearly
consistent with principles on which the taxes referred to in section 1(3)
are based whether express or implied, or…
Ooops! It’s expressly allowed in law so this bill won’t tax Amazon either.
Now, you could claim that we should just change that treaty with Luxembourg. The problem with that being that every double taxation treaty with every country (we’ve over 150 of them) reads the same way. Because this is the standard double taxation treaty that all countries sign with each other. In order to get Amazon to pay corporation tax in the UK you’ve got to rip up the entire current method of international taxation.
Good luck with that. Oh, and by the way. The European Union won’t let you do that either.