April 29, 2014
Amazon UK’s top executive: “When it comes to paying taxes, don’t hate the player. Hate the game.”
by Alex Shephard
Amazon does not like to pay taxes. Anywhere. And for good reason, too—if recent studies are to be believed, collecting sales tax affects the company’s sales.
In 1966, George Harrison sang “Should five per cent appear too small / Be thankful I don’t take it all” about Britain’s notoriously strict tax system; the same year, Ray Davies sang “The taxman’s taken all my dough”; and in 1972, the Rolling Stones fled Britain to avoid the country’s steep taxes. Those days are gone.
In 2012, Amazon made £4.3 billion in the UK, according to The Guardian. They paid £3.15 million in tax. That’s a tax rate of .00073%. For every dollar Amazon makes, they’re literally paying fractions of a cent in tax.
But Amazon UK’s top executive Christopher North (not to be confused with Chris Noth, who played Mr. Big in Sex and the City) thinks that it’s not Amazon’s fault that they pay next to nothing in taxes. According to The Guardian:
“We pay all of the taxes we’re required to pay in every jurisdiction around the world, including the UK … I don’t think following the law gives the company an unfair advantage.” For tax purposes, North and his 7,000 Amazon colleagues in the UK—in warehouses, software design, procurement, accounting, human resources, and other functions—do not work for the same company that transacts with UK customers. Instead they just provide “services” to the Luxembourg company. In doing so, latest accounts show they generated sales of just £320m, paying only £3.15m in tax.
In one sense, North isn’t wrong: Amazon is merely exploiting loopholes and end-arounds that already exist—and that many other corporations surely use. Any company—but perhaps especially the company that owns the domain relentless.com—is going to seek out any advantage it can find in order to maximize revenue. It’s on governments to collect taxes; it’s not on Amazon to pay taxes, as long as they’re following the law. Don’t hate the player, hate the game.
That said, Amazon and its employees certainly utilize a number of state services—to the best of my knowledge Amazon delivers its packages using roads paid for by British taxpayers—but few companies (if any!) will chip-in because it’s the right thing to do, even if, again, they benefit immensely from government services paid for by others.
But it’s hard not to find North’s comment that “I don’t think following the law gives the company an unfair advantage” just a bit facetious. Following—some would say exploiting—the law has given the company a great deal of advantages, most notably over tax-paying competitors like small businesses. And this is, after all, a company that receives more money from the British government than it pays in tax. (For more on the effect Amazon’s tax avoidance has on independent bookstores, see the MobyLives report from last summer.)
Finally, the fact that Amazon employees like North “provide ‘services’ to [a] Luxembourg company” is a crucial one. Sure, they’re technically following the law, but that doesn’t change the fact that tax avoidance is a key aspect of its European strategy—last year, for instance, they also barely paid taxes in Germany. Perhaps North and I disagree on what constitutes “unfair,” but exploiting loopholes (to say nothing of Luxembourg, the loophole of countries) to maximize revenue hardly strikes me as fair, especially when one considers that Amazon is able to offer lower prices than its tax-paying competitors because it has the resources to do so (because it doesn’t pay taxes).
North defended Amazon UK’s decision to headquarter in Luxembourg, saying:
“I would defy anybody to find a way to have 120m products available to UK customers if they only did that from a single UK team, sourcing products from the UK, with only warehouses in the UK. We just couldn’t do that. And a single European business is going to need a single European headquarters.”
He’s certainly right—one can easily see the benefit of having a single European headquarters. But that doesn’t change the fact that Luxembourg was chosen explicitly to avoid paying taxes in other countries. It’s a matter of convenience, no matter how you look at it, but it’s clear that economic convenience trumps all else. There’s also something of a threat in The Guardian‘s piece on North and Amazon’s tax avoidance. According to the piece, North said it “would be impossible to dismantle the online retailer’s tax arrangements without withdrawing millions of products from its British website.” Got that? Make Amazon pay taxes and you won’t be able to get what you want anymore—certainly not any lady bug jugs or Tuscan milk.
Whether or not North and Amazon would, indeed, have to pull items in order to pay taxes is up for debate, but the growing chorus of people demanding that the company pay its fair sure in taxes is certainly not a welcome development. Jeff Bezos lost over $2 billion last week, when investors began to question the company’s ability to turn a profit. Amazon runs notoriously thin margins (and usually loses money) in its quest for growth; having to pay proper taxes everywhere it does business would be a huge blow to the company.
Christopher North is also a series of popular toiletry items in Britain.
Alex Shephard is the director of digital media for Melville House, and a former bookseller.