Amazon avoids paying tax in the UK and other EU countries

How to exploit the situation to your advantage!

[nonstop]

I just wondered what you all thought about the way Amazon currently handles it's tax affairs, by routing its business though Luxemburg where it does very little business and has a very low rate of tax it avoids paying corporation tax in the UK, Germany, France and all other EU countries.

As we have to compete with Amazon on many products do you feel that Amazon are not playing on a level playing field?

Do you think there will be a backlash against Amazon? after all morality rides high with peoples shopping decisions these days

Do you pay your corporation taxes?

Are you advertising on your site that you pay your taxes to appeal to customers morality?

The situation seems to be reaching a crisis point with Amazon sticking to it's guns on the issue

[Rosalind]

As a shopper, I think it's immoral and I try to avoid buying from businesses who avoid tax in this way. However, if you're trying to compete against it, you're coming up against two huge barriers: knowledge and convenience. Just because corporation tax has been in the news a bit, doesn't mean that most people are aware of which businesses are dodging tax.

And convenience, in that it's very easy to keep shopping the way you usually do and quietly ignore the tax issue.

I would *love* companies to advertise how much tax they pay, and what % of revenue this represents.

[oliondor]

It seems a good idea.

[Samizdata]

First of all, it is not just Amazon - Google, eBay and other corporations do the same thing.

Secondly, it is currently perfectly legal (though whether it should be is debatable).

Starbucks, for example, has over 700 outlets in UK but claims to make no profit there.

Small independent businesses cannot compete with this and are often crushed.

As Leona Helmsley once said, "only the little people pay taxes".

...

[haggul]

It seems the backlash has already started :

[news.sky.com...]

[dpd1]

morality rides high with peoples shopping decisions these days

People may say that. In reality, I think the majority of customers couldn't care less. The media may care... Politicians may care... But average people? I doubt it. People may say they care, but most people are hypocrites. In the US, people whine about no good paying jobs, but virtually all of those same people will buy a foreign made product over a US made one, if it's just a few dollars cheaper. People were supposedly outraged by the fact that Apple's products were being made in factories that had less than ideal conditions. I don't know why, since that's not exactly earth shattering news. But you'll notice that Apple is still at the top of the market and pulling in millions. The alleged "changes" they have made, have amounted to nothing more than some warm and fuzzy PR efforts. So morality doesn't seem to be much more than talk for most people.

[nonstop]

if people didn't care less why did Apple change the conditions?

I think you are wrong, shopping has become much more social now, people are sharing their purchases and products they like and getting feedback from their friends, if the feedback is bad the brand isn't going to do very well.

R.A.K. appeal to the vast (and ever-growing) number of consumers who make up GENERATION G (that’s G for Generosity not Greed). Disgusted with big, arrogant, sloppy and out of touch institutions, fed-up consumers around the world increasingly expect businesses to be socially, ethically and environmentally responsible:

71% of people “make it a point to buy brands from companies whose values are similar to my own.” (Source: Young & Rubicam, August 2010.)

In 2006, ‘strong financial performance’ was the third most important factor for US consumers in determining corporate reputation. By 2010, financial returns had fallen to the bottom of Edelman’s rankings, while ‘transparent and honest practices’ and ‘company I can trust’ were the two most important. (Source: Edelman Trust Barometer, 2010.)

87% of UK consumers expect companies to consider societal interests equal to business interests, while 78% of Indian, 77% of Chinese and 80% of Brazilian consumers prefer brands that support good causes. (Source: Edelman, November 2010.)

The link with R.A.K.? Members of GENERATION G are also left cold by old-school business priorities and formalities. With sharing, creating, discussing and collaborating for many becoming a way of life (both on and offline), people want and expect interactions to be genuine and enjoyable. And yes, that includes interactions with brands.

Meaning R.A.K. reach out to those consumers craving ‘human’ brands who show not generosity, but acts of compassion, humanity, or even just some personality.

source: [trendwatching.com ]

consumers are getting ever more demanding, and their demanding more from the big brands just selling a product the same as everyone else isn't enough.

Maybe in the USA people aren't bothered, the USA is a much more capitalist society where it's all about the bottom line.

In the UK the group 38degrees has called for a boycott of Amazon, this group has over 1 million members and raises more than £1 million in donations each year. This is just one group calling for this in the UK! and their targeting social media to spread the word. Then there are other groups , newspaper articles, forums and headline news stories on a time when the UK is being told it will face another 6 years of austerity at the same time these companies are ripping off the British people by not paying tax. 5 years ago nobody would have cared.

[dpd1]

They may very well care more over there, I don't know. But here they don't. The company has been battling it out with numerous states over taxes for years, and most people simply don't care. What they care about is getting stuff as cheap as possible, even if it hurts them in the long run. Amazon has given in to some states, simply because they were tired of fighting it. Not because of consumer pressure. Apple gave in to media pressure and a small minority of bleeding hearts, and made some half ass attempts to appease them. Everybody else kept buying iPads and iPods like always.

I just saw a video last night for somebody offering custom guitars in England, and they bragged about the fact that they were being made in S. Korea, like that was some awesome thing. So I can't imagine people think all that differently over there.

Lets see what happens by mid year. If they do nothing to change the tax situation over there, but basically still bring in the same revenue... then you have your answer. But I think what people say in a poll, or what an advocacy group does, is totally different than what is really happening. Of course people are going to claim they care. That doesn't mean they actually do. If put on the spot, nobody is going to admit... 'Yes, I shop at Walmart and love buying all the cheap stuff that is made by twelve year olds in China.'

[HRoth]

Re getting stuff as cheap as possible, it's true that some people want exactly that and don't care even if it hurts them in the long run (like stuff made in China--re that, btw, it is pretty much impossible to buy a computer that is actually made in the US; it might be put together here, but the parts are all made abroad, so that's not a real option if that's what you're looking for, and I've looked. I personally hate Apple and won't buy anything they make). I've run into this problem in my own niche, where there are people charging 1/3 what I am charging for similar products because they are running their business as a hobby or for the sake of being admired. They have day jobs and they even pour money from that day job into their business. They run sales and give free shipping etc., playing at being businesspeople and all the while losing their shirts. There is no way I can compete with such people in terms of price, and I have lost customers to them. I was disturbed about this at first, but no evil eye, I have not gone out of business despite these guys sprouting up all over. And I concluded, if people want cheap, let them go get it. I don't want cheap customers. The point is that while there are people who are happy to buy the equivalent of cheap Chinese crap at WalMart, there are also people happy to buy something made here by someone who is a professional--and to pay the prices for that.

Re paying corporate taxes, I got rid of my corporation status because it was not helping me do what I wanted to do. The state where I had it registered was charging a high flat rate of $1000/year (they've since changed that) and I could not get the insurance benefits I had hoped to get for it, so it was a waste of money and I went back to being a sole proprietor. So for me as a businessperson, this is a non-issue. For me as a consumer, I more and more try to buy things used, especially vintage made in US.

[martinibuster]

Microsoft, Apple, eBay, AOL, Skype & Starbucks do the same thing. Likely many other companies, according to this recent article [dailymail.co.uk].

What can you do about it?

[HRoth]

I think political avenues are pretty much closed at this point, at least in the US. For instance, I read an article this morning about how BoA is now "too big to indict." Sort of like millionaires are basically never convicted of murder. So I am cynical about that. What is left for us schmoes is to buy used, handmade, local, and mom-and-pop--and to mention that's what we are to our customers. They pretty much know that anyhow--at least, mine do.

[martinibuster]

I read an article this morning about how BoA is now "too big to indict."

Switch newspapers, that doesn't match recent history. Did you read this article about how the U.S. brought a UK company to justice (or shakedown) for laundering drug money?

HSBC to pay $1.9 billion to settle US money-laundering case
Los Angeles Times [latimes.com]
British bank HSBC agrees to pay $1.9 billion to settle a U.S. money-laundering case. The settlement allows HSBC to avoid criminal penalties

It would seem fair if the responsible executives served some hard time. So on that point, you have to wonder about the system. Nevertheless, there is still some justice out there, if imperfect like everything else.

[brotherhood of LAN]

by routing its business though Luxemburg where it does very little business and has a very low rate of tax it avoids paying corporation tax in the UK, Germany, France and all other EU countries.

That is the problem, essentially. Being in the common EU market this is perfectly acceptable. Ireland's boom was helped a lot by having low corporation tax, so the likes of Google set themselves up there for their EU customers.

It's a lawmakers problem, IMO. Of course, the problem remains that if they tax more, or tax more effectively... it raises the possibility of companies going elsewhere or thinking twice about investing in the country.

If corporation tax in the UK isn't effective because it's being 'priced out' by other EU countries... then change it.

[dpd1]

I agree that there are people with a conscience. Luckily, I have many of them as customers. My feeling though, is that MOST people don't. And when it comes to what big companies or governments do, most people don't care what they do, until it affects them directly. Which is not morality, that's actually selfishness. Morality is when somebody cares about something, even if it does NOT affect them. ie... Most people in the US complain about taxes and how much the government wastes "their" tax money. Until an 'I want to get re-elected' refund check or freebee handout check shows up in their mail box... Then they suddenly don't have a problem with how the government spends tax money.

I personally think the public has a lot more power than they give themselves credit for. I have been on a quest to find made in US sellers for a lot of stuff I buy. It's not easy, but you can do it. And for the people that want to camp out on city hall lawns for months and disrupt traffic, complaining about the evil banks and so-forth... It would probably be a lot more easy just walking into their big evil bank and taking their money out. Plenty of small banks would be more than happy to take their money and treat them better. But most of the 'occupy' crowd won't do that, because that would take effort.

Personally, I welcome the big companies to keep getting bigger. Because the bigger they get, the worse job they do. I've never seen a single company handle huge growth well yet, and Amazon won't be an exception. Just got a shipment the other day where they crushed my $400 camera in a box full of heavy stuff, with zero padding. Got a form email back that didn't even apologize. So there you go... Already on the way down. Apple will eventually slide as well, not because they don't pay taxes, but because they are so arrogant, that they think everything they touch turns to gold. I've been there since the Apple II, and I think they are far worse off now than in the dark days of the early 90's. You can checkout my laptop battery that looks like a balloon for proof, which they condescendingly tried to tell me was "normal wear". When a company starts lying to you, and doesn't even make the effort to make it a good lie... It won't be long until the big fall. I love them, but I would personally sell my APPL stock and call it a nice run.

[nonstop]

half of adults in the UK gave to charity last year (28.4 million adults) so I guess some people have a conscience :)

If corporation tax in the UK isn't effective because it's being 'priced out' by other EU countries... then change it.

The problem is Amazon pays less than 5.4% corporation tax on it's whole european profits by being in Luxemburg

Amazon's Luxembourg arrangements have helped it pay an average tax rate of 5.3 percent on overseas income over the past five years, less than a quarter of the average rate across its major foreign markets.

this is morally wrong.....meanwhile the NHS is getting stripped back so that the government can cover this shortfall in income.

it's not just europe tho:

Had Amazon remitted all that to the United States and then paid the headline U.S. corporate income tax rate on it, the firm would have incurred taxes of more than $700 million. But it has not and the deal has allowed Amazon's Luxembourg unit to accrue tax-free cash worth more than $2 billion.

As the cash built up in Amazon Europe Holding Technologies, the firm started to lend to Amazon EU SARL. Besides funding international expansion, this has generated up to 45 million euros a year in interest since 2005 - all untaxed.

and it looks like the IRS in the USA is looking for a big chunk of this cash back:

Amazon disclosed in October 2011 that the IRS wanted $1.5 billion in unpaid taxes. It has declined to say exactly what transactions the charge relates to but said it was linked to "transfer pricing with our foreign subsidiaries" over a seven-year period from 2005.

you can read more here: [articles.nydailynews.com ]

this is tax avoidance on a grand scale by the company with a "smile" on the box.

The governments response is that they are spending £900 million of tackling tax avoidance, if these companies come up in the news again that they haven't paid any tax then the government will have egg on its face so im guessing they wont get away with it forever and Amazon will have the change it's easy money business model :)

[HRoth]

Martinibuster, yes, you are right--I misremembered the name of the bank. It was HSBC, not BoA. There was an article on the front page of the NY Times wondering whether some banks had become "too big to indict." IOW, the Justice Dept. or whoever was in charge, decided to take a settlement instead of indict people and send them to prison because if they did the latter, the sky might fall and the Sun might blow up, etc.

dpd1, actually, Occupy has been one of the major voices for people removing their money from banks and putting it in credit unions. I think you cannot possibly argue that Occupy is lazy, no matter what you think of them otherwise. They did a lot for NYers after Sandy--many NYers argue they have done more than FEMA or the Red Cross, esp. in the less glamorous neighborhoods (i.e., off Manhattan). And then there is their Rolling Jubilee program, which really tickles me since it is based on a concept from the Bible--that every seven years all debts were to be canceled in Israel for the Jubilee year, a sabbath year. They buy up old debts and cancel them. They have bought up $2 million worth of debts so far. These are those pennies-on-the-dollar debts where the debt collectors threaten to put people in jail. If you have ever been harassed by a skeeve debt collector, you will understand how much relief it means to a poor person not to be pursued anymore for something like that. I intend to make this a regular part of my charity giving myself. I don't believe demonstrations work anymore, but IMO this kind of action does work to create real community. People actually helping other people is supposed to be what it's all about.

[Bewenched]

Amazon basically does the same thing in most states where they have shipping warehouses. They used to have one in north Texas and when the state went after them for the money they owed they laid everyone off and left.

It's a crime and they're being allowed to get away with it.... at least for now. The US should go after them hard core.