Amazon is facing criticism after its British tax bill fell to a mere 1.7 million pounds ($2.2 million) despite a big jump in sales and profits.
Records show Amazon U.K. Services Ltd. faced a 2017 tax bill of 4.6 million pounds ($6 million) but paid the lower sum, deferring the rest.
Its pre-tax profits for the period were 72.4 million pounds, almost triple the previous year’s 24.3 million pounds. Revenue rose to 1.99 billion pounds, from 1.46 billion pounds.
The low tax bill is due partly to the way the European Union works, where multinationals have their tax base in one country, often with a very-low tax regime. Earnings from around the bloc are registered in that country — a system called profit-shifting — which means that companies like Amazon end up paying very little tax in many countries where they have significant operations.
Amazon is one of a group of multinationals that the EU has accused of arranging unusually advantageous tax deals with the EU country they are based in.
In Amazon’s case, that is tiny Luxembourg. The EU ruled in October last year that Luxembourg gave illegal tax benefits to Amazon worth around 250 million euros. Amazon paid four times less tax than local companies, it said.
The EU estimates that governments lose 50-70 billion euros ($58-81 billion) a year in tax revenue due to multinationals’ ability to report the bulk of their earnings in one EU state.
Meanwhile, brick-and-mortar retailers say they struggle to compete with online giants that use such loopholes to lower their bill.
Amazon Web Services, which provides cloud computing storage for a range of high-profile clients, including the UK’s tax collector, HMRC, gave share awards to staff of £11.8m, compared with £5.8m in 2016.Amazon, Facebook and other tech giants are regularly accused of not paying enough tax.
Amazon Services UK’s latest response to such allegations is typical. A spokesman said it paid all the tax it was required to “in the UK and every country where we operate”.
Other companies that have faced controversy have also made it clear that they abide by the present tax rules.
And yet Amazon’s UK tax bill for last year is widely regarded as too low – and at a time when High Street shops are suffering.