June 25, 2015
Amazon celebrates last year of barely paying British taxes by barely paying British taxes
by Alex Shephard
Amazon UK recorded £5.3bn in sales last year—a 14% increase in revenue compared to 2013—but paid only £11.9m in taxes (or “tax” as it is known in the UK). In 2012, Amazon UK paid only £2.4m in taxes on ~£4bn in sales.
Amazon has been able to keep its UK tax bill low for years by funneling its business through Luxembourg, where taxes are much lower. Amazon customers in the UK technically purchase goods from Amazon Europe Holding Technologies, which is based in Luxembourg; the orders are then fulfilled by Amazon UK, which keeps costs down. According to The Bookseller “Amazon’s UK turnover was just under £680m in the year to 31st December 2014, up from just under £450m the year before.” Amazon UK’s tax bill reflects fulfillment, as well as “warehousing, distribution, and administrative work, such as negotiating purchasing deals with book publishers, but not sales.”
Amazon had funneled its EU business through Luxembourg for years, but ceased exploiting the loopholes on May 1 of this year in response to the UK’s “Google Tax,” which is meant to punish American megacorporations who avoid paying taxes and an EU inquiry. The announcement, which was made in late-May, was a surprise and it was welcomed by many inside and outside of the publishing industry—booksellers, unsurprisingly, were especially please, in part because they had helped lead the fight against tax avoidance in the UK. Amazon also stopped funneling its business in Germany, Italy, and Spain through Luxembourg on May 1.
Amazon will undoubtedly pay a higher tax bill in the UK next year, but it’s an open question as to how high that bill will be. The UK has its own tax loopholes, of course, and now that Amazon’s tax strategies are less dodgy, it may receive more grants from the UK government. According to The Bookseller, “the retailer received £1.8m in government grants last year, according to the document, often used to subsidise UK warehouses—a figure 14% higher than in 2013.”
It’s unclear how Amazon celebrated its last (hopefully) comically small tax bill. But maybe they didn’t celebrate at all—barely paying taxes is its own reward.
Alex Shephard is the director of digital media for Melville House, and a former bookseller.