Amazon’s booming UK business paid just £11.9m of tax last year, while the online retailer’s Luxembourg unit took £5.3bn of sales from British internet shoppers without being subject to UK tax, according to company filings.
The Amazon group posted a strong UK performance in 2014, with overall takings rising by more than 14% to £5.3bn. However, its British-based Amazon.co.uk Limited subsidiary recorded a profit of just £34.4m and tax of £11.9m, according to results filed at Companies House this week.
As in previous years, the UK accounts make clear Amazon.co.uk Limited claims not to sell to British online shoppers: instead the group’s Luxembourg arm fulfils that role. Amazon.co.uk Limited’s much more modest turnover of £679m comes from providing “fulfilment and corporate support services” to Luxembourg.
The Amazon group’s total UK sales of £5.3bn – representing 9.4% of its global sales – were taken through its Luxembourg company Amazon EU Sarl, which has a much smaller number of employees. Amazon EU Sarl also took billions from Germany, France and other major European economies. It was not subject to tax on any resulting profits in those markets.
This controversial structure which allows technology companies to divert sales out of major economies – avoiding tax on any consequent profits as a result – has led to a string of tax reform initiatives.
The G20-led reform programme, being carried out by the Organisation for Economic Co-operation and Development, signalled its determination to end the practice two years ago. These wide-reaching reforms are still being fine-tuned, with further developments expected later this year.
Meanwhile, George Osborne has pre-empted the G20 project on the single issue of diverted sales and profits as exploited by Amazon. In April the chancellor introduced a punitive 25% rate for those companies artificially shifting sales and profits overseas.
Last month Amazon quietly abandoned its practice of pooling European sales in Luxembourg. Instead the sales hub business opened taxable branches in its main European markets, including the UK. As a result, for the first time since 2004, all Amazon sales with British online shoppers are going through a business that will file a UK tax return.
That development is unlikely to lead to a leap in Amazon’s UK tax bill, however, as the company continues to use further controversial structures to shift profits out of Amazon EU Sarl – which reported a loss last year – and back to the US. Competition officials in Brussels are examining this arrangement, which was sanctioned by the grand duchy in 2003. They believe tax treatments agreed by the Luxembourg authorities may have been so generous as to constitute illegal state aid.
Amazon’s former head of tax, Bob Comfort, last year gave an interview recalling how in 2003 the then prime minister of Luxembourg, Jean-Claude Juncker, had behaved as “business partner” to the online retailer. Juncker is now the president of the European Union’s executive arm, the European commission.
Three years ago Comfort was appointed Luxembourg’s “honorary consul for the Seattle region” because of his close relationship with the grand duchy and tasked with extolling the benefits of the country to other US tech firms.
The accounts for Amazon.co.uk Limited show the UK business is continuing its rapid expansion. The document shows that 7,722 staff in warehouse, procurement, software and other roles were employed during the year, up from 5,912 in 2013.
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