After Google, Amazon under fire for ‘pathetic’ UK tax contribution

After Google, it is American online retail giant Amazon's turn to face the wrath of UK parliamentarians and the public for tax avoidance, after it emerged that the company received more money in UK government grants last year than it paid in corporation tax in Britain.

Amazon's UK subsidiary paid just £2.4 million in corporate taxes last year, the online retailer's accounts show, on sales of as much as £4.3 billion.

The tax bill was a little less than the £2.5 million in government grants Amazon received over the same period, according to a Companies House filing.

Labour MP Nick Smith described Amazon's tax contribution as "pathetic".

The taxes are relatively low compared to sales because the company earns its profits in Luxembourg.

Amazon has always insisted that it pays all required taxes in every jurisdiction that it operates in. Companies only have to pay tax on any profits they make rather than the value of their sales.

The figures have reignited controversy over the tax paid in Britain by American corporations, such as Amazon, Apple, Starbucks and Google, whose executives have been summoned to appear before the Public Accounts Committee on Thursday to clarify previous evidence they gave about their tax status.

Justin King, chief executive of Sainsbury, has complained the current UK tax laws do not create a ''level playing field'' for online retailers and their bricks and mortar rivals.

Amazon, like Google and Apple, consistently argue that they operate within the law, and make many other tax contributions to Britain, such as National Insurance payments.

But Margaret Hodge, chairman of the Public Accounts Committee, described Amazon's tax contribution as ''just a joke''.

''What people will find particularly galling is that the amount Amazon is paying in tax is actually less than they are taking from UK taxpayers in the form of government grants. Companies like Amazon should pay their fair share of tax based on their economic activity in this country and the profits they make here.
 
''Its behaviour is not only unfair, it is anti-competitive, putting British businesses that do pay their proper tax at a disadvantage.''

An Amazon spokesman said, ''Amazon pays all applicable taxes in every jurisdiction that it operates within. Like many companies, Amazon has received assistance in relation to major investments in the UK''.

The Seattle-based company would not say which investments the UK government has helped with, but last year it opened a new distribution plant in Hemel Hempstead, creating 600 jobs, promising to open three more over the next two years.

It also took an eight-storey office in London to act as its global headquarters for ''digital media development''. The site is one of the linchpins in TechCity, Prime Minister David Cameron's project to redevelop the area around Shoreditch and Old Street as a hub for technology companies.

The government is fearful that a severe crackdown on tax loopholes used by global companies could deter them from investing in Britain. Cameron has called for a coordinated international effort to tighten tax legislation.

Amazon's British subsidiary employed 4,191 people at the end of 2012, and thousands more via contracting agencies, but the company classed it as a service provider to its Amazon EU Sarl business in Luxembourg to reduce its tax bill.

The UK business is funded by fees from Amazon EU Sarl, but these are only just enough to cover its operating costs, leaving little in the way of profits to be taxed.