Taxing Amazon: Ticket to Luxembourg

Front page of the Guardian UK this morning is a report citing research conducted by The Bookseller showing that Amazon UK is funnelling the majority of their UK revenue through their Luxembourg entity.  Presumably there is nothing illegal about this arrangement and their tax accounts and attorneys are just taking advantage of existing rules and loop-holes.  More power to them but the sheer scale of these numbers will rankle even the most ardent supporter of Amazon's business model.

The latest 2010 accounts for Amazon EU Sarl show the Luxembourg office employed just 134 people, but generated turnover of €7.5bn (£6.5bn). In the same year, the UK operation employed 2,265 people and reported a turnover of just £147m. According to the SEC filings, UK sales that year were between £2.3bn and £3.2bn. Amazon in the US has earned an average 3.5% profit margin over the past three years.

UK sales over the past three years, according to the SEC filings, were between £7.6bn and £10.3bn. If the same profit margin was applied, this would have generated taxable profits of £266m-£360m and yielded notional UK corporation tax of up to £100m.

However, in the nine years between 2003 and 2011, the UK-registered company has reported a cumulative net tax bill of just £3m – of which £1.9m was incurred in 2011. This is not the tax actually paid to HMRC; that information is not available because the UK company is not required to produce a cash flow statement.

And while we are at it, back in the good old USofA, a colorado law that would have required Amazon to collect sales tax was thrown out buy a district judge.

From a rather one sided 'editorial' (Gazette)

The infamous Amazon Tax represented an arrogant attempt by state government to profit from Internet transactions. The bill, passed in February of 2010, required online retailers to collect sales taxes or provide summaries of Colorado Web purchases and contact customers to explain the taxes they owed to their government. It meant two things for online retailers: 1. They would collect taxes that would make their pricing noncompetitive, as online sales already generate shipping costs; or 2. Companies would have to divulge to the state the private purchases of customers. Either was unworkable.