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Anorak | Amazon Loses $500 Million: Now, About That Tax Bill

Amazon Loses $500 Million: Now, About That Tax Bill

by | 26th, October 2014

One of the amusements of recent times has been watching the tax campaigners like Margaret, Lady Hodge, huffing and puffing about how terrible it is that Amazon doesn’t pay much tax here in the UK. And it’s true, it doesn’t. But there is actually a good reason for this: Amazon doesn’t make much in the way of profits either:

Amazon, the US retail giant, has revealed its lost nearly $500m in the past three months, the largest amount in its history.

Shares in the company dropped 11pc in after-hours trading, wiping more than $15bn off the value of the company. The company increased sales by a fifth to $20.58bn in the three months to October, but it plunged $437m into the red as it spent heavily on new projects. That figure is more than 10 times the $41m loss Amazon reported in the same period a year earlier.

We’re generally told that the solution to the way that Amazon dodges UK tax is to adopt something called “unitary taxation”. This means that we entirely ignore all the various dodges and loopholes they use internally. We simply look at their sales around the world, the profit they make around the world, and say that if 10% of sales are in one country then so are 10% of profits. A reasonable enough system you might think.

But look at what happens here when we talk about Amazon: exactly the company that the tax campaigners have been saying this rule should be applied to.

The UK is about 10% of Amazon’s sales. So, therefore, 10% of Amazon’s profits (or losses) must be applied to the UK. So, in the last 3 months Amazon has, under this system, lost $50 million in the UK. And companies that lose money in the UK do not pay profit tax in the UK.

So, Hodge and those campaigners, all of whom are screaming for Amazon to pay more tax, are really arguing that amazon shouldn’t be paying any tax at all. Rather sweet of them really, isn’t it?



Posted: 26th, October 2014 | In: Money Comment | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink