The National Audit Office may have highlighted government suppliers that pull levers to minimise corporate tax, but it failed to mention it too works with at least one such organisation. Via an online gov supplier catalogue, the public spending watchdog contracted DXW to host its website in March, but DXW in turn buys hosting …
It's a bit unfair to lump Amazon in with all the corporate tax evaders. Since they barely make a profit. They seem to invest all their profits back into expanding the company, and you only pay corporation tax on what's left. Which is barely anything for the shareholders, in their case.
So whereas MS, Google, Apple etc., all have their HQ in Ireland, make huge profits and then have them sitting in a big hoard o'cash in Dublin because they can't get it out without the US taxman getting his sticky mitts on it - Amazon take their cash pile down to Servers R Us, and invest it into all things cloudy. Once Bezos decides to stop growing the company, and raking in the profits, then you can start thinking about calling them tax evaders. Assuming that they don't decide to pay big hunks of corporation tax at that point. Until then, you can't.
I suspect you probably already know this, which is why you gave their corporation tax against UK turnover, which is totally irrelevant, and ignored profits. A bit of a sneaky journalistic trick, if I may say so, abusing statistics and comparing apples with oranges. If you want to calculate total global Amazon profits, then compare UK turnover to global, and make a rough calculation for any profit-sucking investment that might apply only in the UK, then you can make an assessment of whether their tiny UK corp tax payment is unfairly low. Which it still may be, as they do make some profits.
Lesson in taxation part 1
Your assertion that Amazon should be treated differently to other companies is totally incorrect. Amazon like Apple, Microsoft, Captia, IBM, HP, etc is made up of a whole range of individual businesses for example AMAZON.CO.UK LTD is the UK business. In Luxembourg they have a number of businesses Amazon Services Europe SARL, Amazon Europe Holding Technologies and Amazon EU SARL. Each of the companies is taxable in its own right. To minimise taxes Amazon shifts money from company to company through the use of licensing fees and claiming that all contracts are signed with the company in Luxembourg even where the business is being undertaken in the UK.
This set up allows Amazon in the US to say it does not make any profits (which is not true). However the British tax authorities are not interested in whether Amazon makes money in America, it is interested in whether Amazon in the UK made a profit and if so whether it paid the relevant taxes on that profit. By use of its companies in low taxation states and the user of inter company licensing, loans and transfers Amazon minimizes the amount it has to pay the UK tax man instead paying lower taxes in Luxembourg.
American companies are taxed on their global (and not just their US earnings) which is why these companies will not repatriate earnings which have been taxed elsewhere to the US.
The techniques used by Amazon are no different to those used by all the other companies you mention.
For more on how Amazon structures its business to minimise its tax please see:
... I know you ain't Spartacus
... you is more like an Amazonian astrosurfer, whereas Spartacus was Kirk Douglas (né Issur Danielovitch Demsky) from nowhere near the Amazon.
Re: Lesson in taxation part 1
I've not got time to read your link and check it out today, but thanks for the reply. I'll have a read of it later.
Obviously my information could therefore be wrong, I'm no expert on Amazon's tax affairs. But Amazon report very low profits to its shareholders. Every year. Now unless it's defrauding them, then those are the overall profits for the group - and they shouldn't be hiding secret profits.
Tax consolidation isn't allowed under UK corporation tax, as you say, so each company in the group has to pay over its moolah separately. However, you can get group relief [no sniggering at the back there!]. So one part of a group making losses, can offset those against the profits of another part. I'm no tax expert, so don't ask me how that applies to subsidiaries of Amazon that don't have a presence in the UK - there are circumstances in which it's allowed, and those when it isn't.
So in principal I still hold to my argument (pending reading your article). Amazon aren't making huge profits, less than a couple of hundred million a year globally - because they're re-investing the profits back into the business. They aren't sitting on the huge, unproductive, cash piles that others are. Google, MS and Apple between them have something like $150 billion stashed in Ireland that they won't spend because then they'd get taxed on it. So even if Amazon are avoiding their fair share of UK corporation tax, it's only likely to be a couple of million they owe us, not the couple of billion that MS, Google and Apple are getting away with.
Finally, companies are taking the piss, in an increasingly aggressive manner, but in a (probably) legal way. So it's down to governments to get together and sort this out - which it looks like they're doing. Although it does look to me like some of them may have cheated so much that it's become fraud, by booking revenues to Ireland and the Netherlands where they don't have any operation at all. It would be nice to see a few of them get caught doing this, and lose a few cases on transfer price cheating as well.
Cloud computing = losing control of your data
The NAO must of course abide by the procurement rules.
Equally, as auditors, they have a duty of care. They must keep their clients' data confidential. Handing that data over to a third party and storing it beyond the jurisdiction of English law makes it hard to guarantee confidentiality.
Next time the NAO want to investigate DWP, or whoever, there might be an objection that the NAO can't guarantee to keep the data revealed to them confidential. DWP, or whoever, might refuse to co-operate with the investigation on that basis, and so contracting with AWS, however indirectly, might mean the NAO can't do its job.
Incidentally, it's not just the NAO of course. Consider, for example, Halarose Ltd, who have contracts with 80 local authorities in the UK to maintain their electoral rolls. Where is the data stored? With AWS, in Ireland. Under who's control?
Given that AWS have no – that's no – servers in the UK, how come they're allowed on G-Cloud's CloudStore, where all the customers owe a duty of care to keep our data safe, confidential and under their control?
It's an old saying, a bit of a cliché, but worth repeating – the the only time you're really safe is when CloudStore's down which, recently, has been quite a lot.
Re: Cloud computing = losing control of your data
As I read it, this article is about web hosting. There's no suggestion that client data is stored outside the UK. Unless anyone knows better.....?
I'm no tax expert, so don't ask me how that applies to subsidiaries of Amazon that don't have a presence in the UK
See CFCs, permanent establishment, tax residence, thin capitalisation, every combination of double tax treaty and, as you mention, transfer pricing.