Is it really a surprise that Amazon has cut its tax bill?

Amazon has long been a controversial organisation in the UK retail space.

While many have levied criticisms against the company of anti-competitive practices, its biggest controversies have surrounded tax. In 2012 it was found that in spite of being the UK’s largest retailer and generating sales of more than £3 billion, Amazon had paid no tax on its profits. The government, prompted by the reports, launched an investigation into Amazon, along with the likes of Starbucks and Google who were also employing dubious tax-dodging schemes. Amazon then, three years later, agreed to start paying corporation tax on sales made in the UK and we thought that was that.

However, now in 2017 the online retailer has come under scrutiny yet again after it has been found that Amazon’s tax bill has halved over the past year to just £7.4 million despite retail sales surpassing £7 billion.

This isn’t the company as a whole, but rather its UK Services branch. Amazon UK Services is the retailer’s warehouse and logistics arm that employs about two-thirds of the company’s 24,000 UK staff. Its UK corporation tax bill halved from £15.8 million to £7.4 million year-on-year in 2016. Whats more is that Amazon recieved a £1.3 milliion credit from the UK authorities – £1.3 million that is deductable from future tax bills.

Upon this news, critics have rounded on the company, with some MPs calling on the public to boycott Amazon. 

The company however insists that everything it has done is above board and legal.

“We pay all taxes required in the UK and every country where we operate,” said a spokesman for Amazon UK. “Corporation tax is based on profits, not revenues, and our profits have remained low given retail is a highly competitive, low margin business and our continued heavy investment.”

The main area of contention then, seems to revolve around what tax Amazon is paying and to where. Amazon has assured us that UK retail revenues, expenses and profits are reported in the UK to HMRC, but that they are made public in a consolidated account in Luxembourg, a country which has previously been branded as a tax haven.

Amazon was previously caught out with its dealings in Luxembourg. Between 2004 and 2015, while shoppers would be making purchases in the UK and on the UK site, all of those internet transactions were booked in the Central European country. The company was open with this, and in 2015 said that the practice would change: "[We are] now recording retail sales made to customers in the UK through the UK branch. Previously, these sales were recorded in Luxembourg”.

None of this really should come as much of a surprise. After all, it took almost three years between getting called out on its prior dodgy tax practices to implementing change – and that was only because of then-chancellor George Osborn’s ‘Google Tax’. The company throughout the entire process maintained its innocence and denied that its UK corporate structures were artificial or tax-motivated.

With a previous record of being on less than favourable terms with HMRC, along with a litany of other controversies under its belt in the UK, it seemed like only a matter of time before the retailer would once again get flagged up for something. 

For now we will have to await for Amazon’s to publish figures for its Luxembourg-based business (which aggregates all of its European businesses) to see a true breakdown of UK sales revenues and the tax paid in the last year – but don’t expect that second number to be particularly high.