AMAZON UNDER ATTACK FOR TAX AVOIDANCE – Yet again another U.S based corporation is under attack for paying what amounts to just a fraction of its corporation tax liability due to a number of loopholes in tax legislation.
Amazon saw it profits rise considerably last year from sales of over £4 billion and yet despite the huge profits made from its UK operations it paid just £2.4 million in corporation tax.
When it comes to large corporations and their ability to employ a sizable work force it will come as no surprise that Amazon was also awarded £2.5 million in EU grants for setting up and operating warehouses in less prosperous parts of the UK.
Currently Amazon.co.uk sells one in every four books that are purchased in the UK; but it’s not just books that boost Amazon’s profits. Over the years the corporation has diversified in selling everything from DVDs to Household Electronics and there are many small business groups that have accused the company of almost destroying the British high street as ‘traditional’ retailers simply cannot compete on the operational cost savings of running a business online compared to high street retailing. There are now many areas in the UK where the high street has become almost ghost towns.
While many small businesses are struggling and still having to pay full tax liability it is little wonder why there is a rise in the number of high street shop closures and why small retailers are the most vulnerable to going out of business.
In the last 10 years Amazon has paid just over £6 million in corporation tax as it continues to channel money through subsidiaries and other countries, such as Luxembourg, where corporation tax rate is far lower than that of the UK.
MP’s are calling for change in order to close tax avoidance loopholes and many refer to the current situation as a ‘complete joke’.
“Companies like Amazon should pay their fair share of tax based on their economic activity in this country and the profits they make here. Its behaviour is not only unfair, it is anti-competitive, putting British businesses that do pay their proper tax at a disadvantage.” Labour MP Margaret Hodge
This is certainly not the first time that Government and the public have been more than a little irate at U.S companies over their tax avoidance practices, indeed Google, Amazon and Starbucks have all avoided paying millions in to the Government coffers over the years but the Government has been quick to point the finger at what it calls an unethical way of doing business.
The stark reality is that these companies are doing what their shareholders expect them to do and that is to cut costs, increase profits and provide health annual dividends.
It could be argued that the money these companies save through tax avoidance is utilized with greater benefits; rather than handing over cash to the UK Government who continuously waste public funds and therefore accrue little or no benefit for the taxpayer.
The truth of the matter is that while the Government continues to berate these corporations it was their incompetence that allowed for the loopholes to be created in the first place.
It is unlikely that any Government ministers are a ‘tax expert’ and therefore Government rely on outside expertise from companies such as KPMG. These accountancy and tax firms help Government create tax legislation with their inside knowledge then pass this on to their corporate clients in order to avoid tax.
I am afraid that blaming the likes of Amazon, Google or Starbucks for tax avoidance is simply a ‘smoke and mirrors’ trick initiated by the British Government in order to hide their own incompetence.
Yes these companies are putting a massive strain on our high street retailers and are no doubt responsible for killing off a number of small businesses as they simply cannot complete. However business is business and the job of company executives is to avoid paying anything it doesn’t need to and if this Government were capable of creating concise and effective tax legislation then these corporations wouldn’t be able to avoid their tax liability.
We often hear talk of ‘public boycotts’ in order to shame and force companies like Starbucks into paying their dues and while Starbucks did offer an ‘olive branch’ payment of £20 million to the taxman, neither Google nor Amazon made any such gesture – and why would they?
The Public Accounts Committee (PAC) has announced that it will once again probe the tax affairs of Google with the help from Ernst & Young; which is another large accountancy firm with many large corporations for its clients. Yet again the ‘smoke and mirrors’ trick is being deployed and PAC is again wasting the public’s money by initiating and implementing such a probe. This is nothing more than allowing the fox to guard the hen house from the inside and yet Government, due to their incompetence, has no other choice but to make the same mistakes over and over again.
Don’t expect this situation to improve any time soon. What the Government needs to do is employ ‘experts’ and not call in outside help from firms whose responsibility lies with their corporate clients and not the public interest.
Do you think Government should employ full time tax experts? Do you think that foreign companies should pay their fair share of tax? Have your say… leave your comments below.