Amazon had sales income of €44bn in Europe in
2020 but paid no corporation tax
Despite lockdown surge the firm’s Luxembourg unit made
a €1.2bn loss and therefore paid zero corporation tax
Rupert
Neate Wealth correspondent
@RupertNeate
Tue 4 May
2021 06.00 BST
Fresh
questions have been raised over Amazon’s tax planning after its latest
corporate filings in Luxembourg revealed that the company collected record
sales income of €44bn (£38bn) in Europe last year but did not have to pay any
corporation tax to the Grand Duchy.
Accounts
for Amazon EU Sarl, through which it sells products to hundreds of millions of
households in the UK and across Europe, show that despite collecting record
income, the Luxembourg unit made a €1.2bn loss and therefore paid no tax.
In fact the
unit was granted €56m in tax credits it can use to offset any future tax bills
should it turn a profit. The company has €2.7bn worth of carried forward losses
stored up, which can be used against any tax payable on future profits.
The
Luxembourg unit – which handles sales for the UK, France, Germany, Italy, the
Netherlands, Poland, Spain and Sweden – employs just 5,262 staff meaning that
the income per employ amounts to €8.4m.
Margaret
Hodge, a Labour MP who has long campaigned against tax avoidance, said: “It
seems that Amazon’s relentless campaign of appalling tax avoidance continues.
“Amazon’s
revenues have soared under the pandemic while our high streets struggle, yet it
continues to shift its profits to tax havens like Luxembourg to avoid paying
its fair share of tax. These big digital companies all rely on our public
services, our infrastructure, and our educated and healthy workforce. But
unlike smaller businesses and hard-working taxpayers, the tech giants fail to
pay fairly into the common pot for the common good.
“President
Biden has proposed a new, fairer system for taxing large corporations and
digital companies but the UK has not come out in support of the reforms. The
silence is deafening. The government must act and help to grasp this
once-in-a-generation opportunity to banish corporate tax avoidance to a thing
of the past.”
Paul
Monaghan, the chief executive of the Fair Tax Foundation, said: “These figures
are mind-blowing, even for Amazon. We are seeing exponentially accelerated
market domination across the globe on the back of income that continues to be
largely untaxed – allowing it to unfairly undercut local businesses that take a
more responsible approach.
“The bulk
of Amazon’s UK income is booked offshore, in the enormously loss-making
Luxembourg subsidiary, which means that not only are they not making a
meaningful tax contribution now, but are unlikely to do so for years to come
given the enormous carried forward losses they have now built up there.”
The Amazon
EU Sarl accounts filed in Luxembourg show 2020 sales rose by €12bn from €32bn
in 2019. The accounts, that extend to just 23 pages (compared with hundreds of
pages for large UK companies), do not break down how much money Amazon made
from sales in each European country.
However,
Amazon’s US accounts show that its UK income soared by 51% last year to a
record $26.5bn (£19.4bn) as people at home during the coronavirus pandemic
lockdowns turned to it for online shopping as high street stores remained
closed for most of the year, while homeworking drove increased use of its cloud
software, Amazon Web Services.
While
Amazon celebrated the rise in revenue collected from UK customers, it did not
state how much corporation tax it paid in the UK in total last year. The
company, which has made its founder and outgoing chief executive Jeff Bezos a
$200bn fortune, paid just £293m in tax in 2019 despite the company collecting
UK sales of $17.5bn that year.
The £19.5bn
that UK customers spent at Amazon in 2020 is approximately double the takings
at Marks & Spencer, the 137-year-old retailer, and underlines how the
Covid-19 pandemic is revolutionising the way we shop and threatening the future
of the high street. Last week Amazon reported its largest ever quarterly profit
of $8.1bn on sales of $109bn.
An Amazon
spokesperson said: “Amazon pays all the taxes required in every country where
we operate. Corporate tax is based on profits, not revenues, and our profits
have remained low given our heavy investments and the fact that retail is a
highly competitive, low margin business.
“We’ve
invested well over €78bn in Europe since 2010, and much of that investment is
in infrastructure that creates many thousands of new jobs, generates significant
local tax revenue, and supports small European firms.”
Doug Gurr,
the recently-departed managing director of Amazon.co.uk, has explained that:
“The Amazon.co.uk website is operated by Amazon EU Sarl, a Luxembourg-based
entity, which is a European headquarters of Amazon.”
Just over
600,000 people live in Luxembourg but many of the world’s biggest companies
have headquarters in the low-tax country.
Amazon
arrived in Luxembourg in 2003, and within a few months secured a confidential
agreement with the country’s tax authorities.
Bob
Comfort, Amazon’s head of tax until 2011, told a Luxembourg newspaper that
Jean-Claude Juncker – then the country’s prime minister and a former president
of the European Commission – had personally offered to help Amazon.
“His
message was simply: ‘If you encounter problems which you don’t seem to be able
to resolve, please come back and tell me. I’ll try to help.’” Comfort was later
appointed Luxembourg’s honorary consul to Seattle, the location of Amazon’s US
headquarters.
Last month
Joe Biden tabled plans at the Organisation for Economic Co-operation and
Development, a club of mostly rich countries, for sweeping changes to the
global tax system, including a minimum corporation tax rate in an attempt to
stop multinational companies exploiting loopholes in the system. Germany and
France have backed the plans but the UK has remained silent.
Washington
had long resisted calls for the global treaties that reformers argued were
needed to ensure that powerful multinational companies pay their fair share of
taxes.
Under the
US president’s proposals, large technology companies and corporations would be
forced to pay taxes to national governments based on the sales they generate in
each country, irrespective of where they are based.
A global
tax floor would also be agreed. The US has suggested a rate of 21%, although
this is higher than in several jurisdictions – including Ireland, Hungary and
the Caribbean – and could be a stumbling block.
Bezos, the
world’s richest person, welcomed Biden’s proposals and said Amazon was
“supportive of a rise in the corporate tax rate”.
Amazon is
not alone in creating complex corporate structures to avoid tax. The big six US
tech firms – Amazon, Facebook, Google, Netflix, Apple and Microsoft – have been
accused of avoiding $100bn of global tax over the past decade, according to a
report by the campaign group the Fair Tax Foundation. All have said that they
pay the correct amounts of tax.
The report
singles out Amazon as the worst offender. It said the group paid just $3.4bn
(£2.6bn) in tax on its income so far this decade, despite achieving revenues of
$961bn and profits of $26.8bn.
The Fair
Tax Foundation said this meant Amazon’s effective tax rate was 12.7% over the
decade when the headline tax rate in the US had been 35% for most of that
period.
Amazon said
the report’s “suggestions are wrong” and the company had “a 24% effective tax
rate on profits from 2010-18”.
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