Amazon has slashed its UK tax bill just as it stands accused of fuelling the crisis on the high street.
Despite soaring sales of close to £2 billion, the web giant’s biggest UK arm yesterday revealed it had paid just £4.5 million in corporation tax last year.
That was down from £7.4 million the previous year – when its sales were actually lower.
Amazon has introduced new food delivery services taking on competition from supermarkets across the UK – yet shops are furious about the company’s tax bill
How Amazon uses loophole to send £2bn in sales revenue out of the UK to avoid tax
Amazon slashes its UK corporation tax bill by taking advantage over Britain’s ageing tax laws and a complicated network of companies in the EU.
The online giant funnelled cash made from sales across all its European businesses – including £1.98billion from the UK – through a company based in Luxembourg.
This company then pays ‘royalties’ to another of its businesses based in the small European country.
The American tech giant’s then uses the costs of its branding and services to cut the remaining profits which it can be taxed for at a lower rate than in the UK.
Meanwhile, the royalties paid to the separate entity are not taxed because it is a type of business not considered a tax resident in Luxembourg.
Unlike some European countries, Britain also allows companies to take generous deductions for stock options and share awards and many companies, especially in the technology sector, use the rules to reduce their tax bills significantly.
‘We pay all taxes required in the UK and every country where we operate,’ Amazon said in a statement.
The news last night enraged retail campaigners, who believe Amazon’s success has contributed to the high street crisis that has seen tens of thousands of jobs lost this year.
They are angry that local shops are hammered by soaring business rates, while the web-based giant pays much lower rates on its out-of-town warehouses.
The Mail has been campaigning for a review of business rates.
Joshua Bamfield of the Centre for Retail Research, which analyses retail trends, said: ‘People will be staggered by these figures.
At a time when major British retailers are in difficulties and having to pay more corporation tax than Amazon, it seems wholly unfair.
This shows that if you employ the finest City brains, you can get away with paying minimal amounts of tax – but if you’re like John Lewis or Sainsbury’s, a UK brand employing hundreds of thousands of people all over the country, you’ve got no choice.’
Wes Streeting, a Labour MP and member of the Treasury select committee, added: ‘£4.5 million is a drop in the ocean given the size of Amazon’s UK sales, and will stick in the throats of businesses on the high street who are struggling to pay their business rates – particularly independent retailers and family-owned businesses.’
‘It’s time for the Chancellor to overhaul the system of business rates to save our high streets, and instead make sure that big multinational corporations like Amazon are paying their fair share of taxes.’
Staff label and package items in the on-site dispatch hall inside one of Britain’s largest Amazon warehouses in Dunfermline, Fife. The company has been accused of killing off British high street
Amazon has been so popular in recent years shoppers are tuning to online retailers instead of shopping in stores
Amazon has several registered companies in the UK, each for a different part of its empire.
Yesterday, it published accounts for its Services division, which used to be called Amazon.co.uk. Essentially, this division looks after its warehouses and parcel delivery business.
Financial statements released at Companies House revealed it had made £1.98 billion in sales in the UK in 2017, up from £1.46 billion the previous year.
Operating profits in the UK tripled to £79 million last year.
Yet its bill for corporation tax – which is paid on profits – plummeted from £7.4 million in 2016 to £4.56 million for 2017.
Amazon products like the Echo device have seen profits soar in the UK but the company has paid a smaller corporation tax bill
The tax payment was partly slashed because Amazon made shares payments to thousands of staff. These are counted as a cost and deducted from profits.
Had Amazon paid the UK’s standard rate of corporation tax, its Services subsidiary would have had to hand over £13.9 million, according to an analysis by the Financial Times.
However, this still pales next to the web giant’s £2 billion UK sales. Because companies pay corporation tax only on profits, many tech firms use accounting methods to reduce their tax liability.
These include increasing costs by making payments to other companies within the same group – often these can be in low-tax countries such as Luxembourg. They also hand out share awards.
Earlier this year, the Mail launched a campaign for a review of the business rates system to help local stores and high street retailers.
A Mail investigation earlier this year found that Amazon pays just £14 million a year in business rates for its 13 enormous warehouses – far below the costs faced by traditional high street stores.
Struggling House of Fraser, which has been forced to close scores of stores and put thousands of jobs at risks, pays an estimated £36.2 million a year. Marks & Spencer, meanwhile, shelled out 12 times more than Amazon.
James Daunt, chief executive of high street book chain Waterstones, said last night: ‘If tax bills fall disproportionately on one set of retailers, that’s not a level playing field – that applies to business rates and it applies to corporation tax.
‘Big guys like us can look after ourselves, but small independent retailers can’t, and it’s particularly unfair on vulnerable companies and small ones.’
As Amazon enjoys huge profits in the first half of this year alone, 50,000 retail jobs were cut across Britain’s high street.
This financial year, the taxman is expected to collect £30.8 billion in taxes from shops across the UK.
Amazon bosses said the tax paid is based on profits and not revenues – defending the corporation tax bill
In a world where online shopping is booming, many believe the business rates structure is outdated and reform is urgently needed.
If not, there are fears streets could be left bare with retailers closing down and thousands of jobs lost.
A spokesman for Amazon said: ‘We pay all taxes required in the 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.’
‘We’ve invested over £9.3 billion in the UK since 2010, including last year opening a new head office in London alongside development centres in Cambridge and London.
‘This year we plan create 2,500 permanent jobs across the country in research and development, our head office, customer service and fulfilment centres, to bring our total workforce in the UK to over 27,500.’