The annual uproar over how much Amazon.com Inc (NASDAQ:AMZN) pays in UK taxes reared its head again today after it was revealed that the e-tail giant paid £7.4mln in tax last year, despite UK sales surging past the £7bn barrier.
Amazon UK Services – the warehouse and logistics division that accounts for almost two-thirds of its 24,000 UK staff – saw its UK corporation tax bill more than half compared to the £15.8mln it paid in 2015.
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The e-commerce group also received a £1.3mln credit from the UK government, which it can deduct from future tax bills.
Is it doing anything illegal?
Amazon technically isn’t doing any wrong. Given its strategy of reinvesting profits into new ventures – such as Amazon Fresh – its UK Services division only recorded a profit £24mln in 2016.
It’s also worth noting that 80% of the company’s £7.3bn UK revenues are retail sales which are reported through a separate company in Luxembourg and aggregated as part of its overall European operations.
Amazon Services UK, which makes its money by charging Amazon’s retail business for delivering its products, saw revenues grow to £1.46bn last year, up from £946mln in 2015.
‘Invested £ 6.4bn in UK since 2010’
A spokesperson for Amazon defended its tax payments, saying: “We pay all our taxes required in the UK and every country where we operate.
“Corporation tax is based on profits, not revenues, and our profits have remained low given retail is a highly competitive, low margin business and our continued heavy investment.”
In July, Amazon announced plans to add 5,000 full-time jobs in the UK this year alone. It is also in the process of opening new warehouses to bring its total number of fulfilment centres in the UK to 15.
“We’ve invested over £6.4bn in the UK since 2010 including opening a new head office in London and development centres in Cambridge and London this year, and creating 5,000 permanent jobs across the country in research and development, our head office, customer service and fulfilment centres, to bring our total workforce to 24,000,” the spokesperson added.
MPs not happy
A number of MPs have expressed their anger at what they think is (yet another) big corporation failing to pay their ‘fair share’ tax in the UK.
Labour’s Margaret Hodge has called on Britons to boycott Amazon until it stops ‘manipulating’ its business to avoid tax.
Speaking to The Sun, she said: “It remains outrageous that Amazon are so blasé that they can ignore all the anger that their failure to pay fair tax in this country.
“It is a scandal they are deliberately manipulating the way they do their business for no other purpose than to avoid tax. I hope people take a leaf out of my book and stop using Amazon.”
Amazon shares were down US$4.61, or 0.5% in pre-market trade to US$982.