Amazon’s tax maneuvers stir up storm in U.K.
Planting its European headquarters in Luxembourg has afforded Amazon significant tax advantages. That does not sit well in Britain, where members of Parliament from across the political spectrum have expressed outrage at the strategy.
t would be hard to find anything better, unless, of course, you’re Cecil or Amazon. A corporate titan, hauled before the sharp-tongued inquisitors of British Parliament, unable to reply in kind because it would only make matters worse. So for more than 40 minutes, Cecil sits and takes a lashing.
What’s caused the politicians’ ire? Amazon’s decision to place its European headquarters about 300 miles to the southeast, in the Grand Duchy of Luxembourg. By basing its operations in one of Europe’s favorite tax havens instead of the U.K. (or France, Germany, Spain or Italy, where it also does business), Amazon has sharply reduced its tax bill.
According to a securities filing, Amazon decreased its global tax rate by 8.1 percentage points last year to 31.8 percent. Amazon paid just 4.2 million pounds (($7 million) in British taxes last year, despite selling 4.3 billion pounds ($7.1 billion) of goods to U.K. shoppers.
Of course, Amazon has had its battles with tax authorities in the United States, too. For years, the company wouldn’t build warehouses in states with large populations in order to avoid creating a so-called “tax nexus,” which would have allowed those states to tax its sales.
States challenged that through legislation and litigation, leading Amazon to cut deals to delay tax collection in exchange for new warehouses and the jobs they bring. Now, Amazon is pushing for a uniform federal sales tax applied in every state and on every online retailer with annual sales of more than $1 million.
Amazon’s European tax strategy is particularly galling for Britons who have seen the prolonged global economic crisis reduce public spending. The government has initiated such unpopular austerity measures as reducing welfare payments and increasing the age when people can claim government pensions. Keen to find revenue, they are clamping down on tax avoiders.
“In Britain, the public are rightly furious, particularly at a time when people on low and middle incomes are struggling, to see these big multinationals gaming the system,” Hodge said in an email interview.
The French government of François Hollande also has raised concerns about Amazon’s Luxembourg tax strategy. And early in July, the Financial Times reported that the European Union’s competition commission demanded Luxembourg hand over documents relating to Amazon’s tax affairs.
