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2.3% Amazon Tax Rate in UK “An Insult” or the Midas touch?


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8/5/2018
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2.3% Amazon Tax Rate in UK “An Insult” or the Midas touch?

Amazon has come under attack for an “insultingly small” payment of corporate taxes relative to its UK revenue and worldwide profits.

On a consolidated basis, Amazon reported $2.5 bn in quarterly profits!  The reporting for the period ending June 30th amounted to a 12-time increase in profits; a record-breaking year by all accounts.

This combination of record profits and all-time low tax payments in the UK leaves many Brits scratching their heads at how the laws could be used to arrive at such a seemingly inequitable result.

Amazon.com’s UK subsidiary, Amazon UK Ltd., paid a mere £1.7 mm on £72.4 mm of earnings.  Amazon’s 2.3% effective tax rate (compared to an average corporate rate of 19% in the UK), was achieved largely through deductions on incentive-based compensation, and garnered widespread scrutiny from taxpayers who felt the company was not paying its fair share.  Using incentive-based compensation in the form of share awards for its 27,000 UK employees allowed the company to offset revenues and lower its taxable income.  Amazon’s share price has increased by 84% in the past few years, such that the cost of stock awards as an expense permitted a significant reduction in taxable income.  In total, the company paid out a staggering £54.8 mm of share awards.

The Tax Justice Network, an anti-tax avoidance advocacy group based in the U.K., criticized the lower tax payment, calling it an "insult."

Representatives of Amazon pointed out that taxes in the UK (as in the U.S.) are based on profits, not revenues, and that they had merely optimized their tax position through perfectly legal means.

A spokesperson for Amazon said in statement: "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."

https://www.marketwatch.com/press-release/amazon-reports-17-million-pound-uk-tax-bill-due-to-share-deductions-2018-08-03

https://www.cnbc.com/2018/08/03/amazon-slammed-for-uk-corporation-tax-bill-despite-record-profits.html

https://www.reuters.com/article/us-amazon-com-britain-tax/amazon-reports-17-million-pound-uk-tax-bill-due-to-share-deductions-idUSKBN1KO1K0

http://www.dailymail.co.uk/news/article-6025331/Online-shopping-giant-Amazon-hides-real-tax-bill-funnelling-6bn-UK-sales-abroad.html



Category: Tax Law


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