Why Doesn't Amazon Pay Taxes in a Country That Needs Revenue

Amazon's tax practices have been a topic of controversy for years, with many people wondering why the company doesn't contribute more to the tax revenue of the countries where it operates.

Amazon's ability to avoid paying significant taxes in certain countries is largely due to its complex corporate structure, which involves multiple subsidiaries and partnerships.

This structure allows Amazon to shift profits to low-tax jurisdictions, such as Luxembourg, where the company has a subsidiary that has been accused of aggressively minimizing its tax liability.

Amazon has also been accused of using transfer pricing, a practice where companies sell goods or services to each other at artificially low prices, to reduce its tax bill.

Amazon has been paying employees in the form of shares, which is an expense it can offset against corporation tax.

This practice is completely legal and was first launched by the then-Labour government in 2000 as a way to encourage companies to give shares to workers.

Amazon's share price has more than trebled in the last three years, so employees given shares are unlikely to complain about receiving them instead of a higher salary.

The only loser in this situation is HMRC, which misses out on corporation tax and other taxes it would have collected if the money had been paid as part of a salary.

Amazon's workforce went up by more than 5,000 in 2017, resulting in more income tax, national insurance, and VAT flowing to the Exchequer.

Amazon's business model is designed to minimize tax liabilities, which has led to criticism from governments and tax authorities.

The company's use of tax havens and loopholes allows it to pay significantly less in taxes than other retailers.

Amazon's complex corporate structure, which includes subsidiaries and partnerships, makes it difficult to determine the company's true tax liability.

This structure allows Amazon to shift profits to low-tax jurisdictions, reducing its tax bill.

Companies Avoid Federal Taxes by giving employees shares, which can be offset against corporation tax. This is a completely legal practice that has been around since 2000, when the Labour government first introduced it.

Amazon has been using this method to lower its tax bill, and its share price has more than trebled in the last three years, making it a win-win for employees.

The only loser in this scenario is HMRC, which misses out on corporation tax and income tax that would have been paid if the money was given as a salary.

This practice has been effective, as the workforce at Amazon increased by over 5,000 in 2017, resulting in more income tax, national insurance, and VAT flowing to the Exchequer.

High street retailers are angry because Amazon pays less in business rates on its UK properties than some traditional retail rivals. This is due to Amazon's business model, which operates from out-of-town locations in areas with lower property prices.

Business rates are calculated according to the market value of property businesses own. A shop that occupies a piece of prime Central London real estate will pay higher rates than a company like Amazon.

Amazon isn't breaking any laws here. It's just the result of its business model and the way business rates are calculated.

Traditional high street retailers can't take advantage of complex international tax arrangements like Amazon can. They also can't shift their operations out of town without suffering.

Professor Paul Dobson, a business expert, agrees that Amazon is a brilliant company, but thinks the rules are unfair. He says the cards are stacked against smaller domestic players.

Amazon's tax strategy is built around its complex corporate structure.

The company uses a network of subsidiaries and partnerships to shift profits to low-tax jurisdictions, such as Luxembourg and the Cayman Islands.

Amazon's effective tax rate is significantly lower than the statutory rate in many countries.

In 2020, Amazon paid an effective tax rate of just 9.4% in the US, compared to a statutory rate of 21%.

Amazon's tax avoidance strategies have been criticized for depriving governments of revenue that could be used for public services.

Amazon's tax evasion and influence tactics are a major concern. The company has been accused of using complex financial structures to avoid paying taxes in various countries.

Amazon has a history of using tax havens to minimize its tax liability, with the company's Luxembourg subsidiary being a prime example. This subsidiary has been shown to have a tax rate of just 1% in 2011.

Amazon's use of tax havens is not unique, as many large corporations engage in similar practices. However, the scale and complexity of Amazon's tax avoidance strategies are particularly noteworthy.

Amazon's influence extends beyond its tax practices, with the company having a significant impact on local economies and governments. In the UK, for instance, Amazon has been shown to have a tax rate of just 1.2% in 2011, while the average tax rate for all UK corporations was 21.5%.

Amazon's UK tax liability is a complex issue, but let's break it down. Amazon UK Services Limited, the UK distribution side of the business, saw its pre-tax profits increase from £24m in 2016 to £72m in 2017.

The company's tax bill actually fell from £7.4m to £4.6m during that time. Amazon has been paying employees in the form of shares, which is an expense it can offset against corporation tax.

This practice allows Amazon to reduce its tax liability, as the value of the shares awarded to employees is not subject to corporation tax. The current rules say employees can be awarded £3,600 a year tax-free, which has been beneficial for Amazon given its share price has more than trebled in the last three years.

The workforce went up by more than 5,000 in 2017, which means more money from income tax, national insurance, and VAT is flowing to the Exchequer.

Amazon's tax arrangements are more complex than they initially seem. Amazon UK Services Limited is just one part of the company's activities in the UK, but it's not the whole story.

Amazon's total sales to the UK rose from £9.5bn to more than £11bn in 2017, but the tax paid on these sales is not publicly available information.

The reason for this lack of transparency is that sales made to customers in the UK are booked through the UK branch of a Luxembourg-based company, Amazon EU Sarl.

This arrangement is entirely legal, but it does mean that Amazon doesn't have to publish accounts detailing the tax it pays in respect of its total activities in the UK.

Amazon established a local country branch of Amazon EU Sarl in the UK in May 2015, which now accounts for all retail revenues, expenses, profits, and taxes due in the UK.

Amazon claims to pay all taxes required in the UK and every country where they operate.