It was recently revealed that whilst the turnover at Amazon UK Services – the company’s warehouse and logistics operation – rose to almost £1.5bn in 2016, its corporation tax payments fell from £15.8m to £7.4m year on year. This has led to outrage amongst bricks and mortar bookshops who have launched a broadside against what they call “Britain’s deeply unfair” tax system which forces the to compete with companies such as Amazon “with one hand tied behind their backs”.
“These latest figures from Amazon confirm what has become an annual event, an annual Groundhog Day. This is, quite simply, that Amazon is able to pay very low rates of tax in the UK … This gives Amazon – possessed of a huge market share and all the associated commercial bargaining power that goes with it – a further substantial advantage over its competitors in the UK book trade,” said Clifton, calling the current system “out of date and discredited” and warning that, without change, “there is a clear danger that more independent booksellers will close”.
“We have to be optimistic and start off with a belief that we can convince people the current system isn’t working. If our calls are not heeded, then we will continue with a situation in which it is much harder to succeed commercially as a bookseller, as the system is unbalanced,” said Clifton. “The system needs to be reformed so the burden of taxation … is spread more evenly [and] corporations like Amazon contribute more.”
Why Amazon Paid Less Tax
The reason why Amazon paid less tax is actually quite straightforward and comes down to the fact that taxes are paid on profit and not turnover. It paid lower taxes because it made lower profits. Last year it made £48m in profit – this year it made only £24m so it paid £7m tax compared to £15m.
Amazon’s profits were lower this year thanks to the fact that each full-time employee in the UK is given at least £1000 of shares every year, and are required to hold them for between one and three years before they can cash them in. With Amazon’s shares going up recently, so does staff compensation (the share price has doubled in the past two years, so £1,000 in shares granted in August 2015 are now worth nearly £2,000). Because compensation is an expense, these can be deducted from revenue which means profits are lower, thus leading to lower taxes.
When approached by Britain’s Guardian newspaper, a spokesperson for Amazon told them: “Amazon pays all the taxes that are required in every country where we operate.”