A: Because corporation tax is calculated as a percentage of a company's profits, so if a company's profits are very low or it makes losses, it doesn't have to pay any.
So let's have a look at Amazon's consolidated group profit and loss account for 2012 from here:
Ah.. I see, it has wafer thin margins so we wouldn't expect it to pay much corporation tax in most countries in which it has sales.
Glad to have cleared that up!
Of course it is a matter of time until somebody turns up and says "Ah, but they hide all their profits in offshore subsidiaries!" which is the sort of thing only an idiot would say because those accounts are the consolidated group accounts, in other words it aggregates all profits (or losses) or all Amazon's subsidiaries, including all the money "hidden in offshore subsidiaries".
There'll be another Enron sooner or later where the auditors agree to omit some subsidiaries and to include others just to suit the client, but Amazon is not Enron. It is a very efficient mail order company that buys stuff and sells stuff (and advertises other people's stuff).
"Ah yes!" shout the lefties, "But they don't pay much VAT in the UK either because they route their sales via Luxembourg."
Yes, that is quite true, they do. They'd be stupid not to. VAT is an EU tax and the EU rules say that people who make money over the internet only have to register for VAT in one EU Member State and you can pretty much choose which one, so Amazon did the sensible thing and chose the one which has the lowest VAT rate (for internet sales) which happens to be Luxembourg. Their tax, their rules.
What a bunch
29 minutes ago
16 comments:
And couldn't they put that profit in a trust fund for their children so that no tax is paid at all, or does that only work for rude MPs?
JimS, those charity scams might just about work on a small level (i.e. MPs) but not for gigantic publicly quoted companies. Not even Hodges is accusing them of that.
I like Amazon. I like low prices and I like keeping my money away from the wastrels in government.
MIM, exactly. You, me and millions of others.
Amazon is a capital-gains type of business, all their profit potential is in the future. The only way they'll get there is by getting into some type of temporary monopoly position. Other than that, investors want to pay for everyone getting cheap stuff is just fine by me.
Mark's absolutely right, of course. There are three different sorts of companies that take in shedloads of money and pay no tax:
1) privately held companies which do ropey deals with offshore people, because nobody cases, because no public shareholders are being defrauded. Specsavers is a good one. "all the profit is in the Guernsey company, the UK companies make sod all, that's just how it rolls".
2) plcs that are hoping the tax regime will change. Apple is a good example. At the moment, they'd have to pay US tax on all of their carefully-sent-to-Ireland money overseas money if they sent it home to pay as dividends. Which is why they're lobbying the US govt to do a money-repatriation amnesty.
3) companies that don't make any goddamned profit, like Amazon. Shareholders are assuming they're as KJ says, but I think from Bezos's point of view they're just looking to be the most goddamned important company in the world so he gets remembered as a Watt or a Ford.
Kj, yes, it is called "grabbing market share".
These people hope that once you undercut everybody else out of business, you have a monopoly and then you can start hiking your prices, but no competitor will ever emerge.
Usually, competitors do emerge so the operation is self-defeating (thankfully).
JB, thanks, those are good categories.
But Specsavers, Apple & Starbucks still pay a fortune in VAT on the stuff they sell in the shops. So perhaps you can have a fourth category for "Companies which pay a fortune in tax but are still accused of not paying enough tax by f-wits who don't think that VAT is a tax".
Shareholders are assuming they're as KJ says, but I think from Bezos's point of view they're just looking to be the most goddamned important company in the world so he gets remembered as a Watt or a Ford.
Maybe that too.
I've got no qualms about any companies reducing cost and increasing utility for consumers. But Amazon is going to try what all the other large companies have been doing in their attempt to build and maintain market share. 1-click shopping patents and tax-incentives received from local american jurisdictions tell me they are not going to do it any more or less "fair", so they deserve any skepticism they get IMO. Too bad the skepticism is directed towards daft, minor issues like Corporation Tax.
MW: the problem isn't that they pay low rates of VAT in Luxembourg, it's that some of their competitors can't be situated in Luxembourg. Fair enough that the business model of the bookstore is on the way out, but there's no need for added competitive advantages for online retailers, noone should pay VAT!
BTW Specsavers, weren't they exempt from paying VAT from goods sent from Guernsey (under a certain treshold), a privilege that they just recently lost?
Kj, of course nobody should pay VAT (The Worst Tax Of All).
The Specsavers story is more complicated than that - they were complaining about somebody else doing the Guernsey trick.
Ah, I see.
If its so easy to dodge tax in the EU why is so much business -friendly opinion opposed to it? ( I asked the same question to Tim Worstall citing other examples of bizarre right-wing EU institutions such as a ban on Keynesian demand management under the growth and stability pact; anti public sector prejudice under the services directive; no State aid to strategic industries under competition policy. Needless to say he had no answer. I can only presume that the strange autistic behaving Conservatives who are getting into a state about the EU want to make it even worse.
@DBC Reed - aren't you making a category mistake? Being anti EU for its lack of accountability does not necessarily imply that you should oppose the tax regime it creates.
DBC, the EU is very corporatist, I think you'll find that a lot of large businesses really love it. The tax system they impose (VAT) and the working time regulations and red tape are barriers to entry for smaller businesses.
G,the "EU" is actually a hodge podge bundle of thousands of different treaties and rules and agreements imposed by a corrupt and unaccountable bureaucracy.
Some of the "EU" rules are better than what the UK rules would have been, most of them are worse, but we can still keep the good rules and ditch all the bad ones if we leave.
You forgot to mention that Amazon is a monopoly power.
This is a much bigger deal than any tax issue.
The profits of monopoly, are a tax on all other production.
True, the blind deny this conveniently because they want rent too.
RS, I knew you'd say that.
I didn't say it because it is clearly not true, but if it makes you feel warm and happy inside to just insult everybody and play holier than thou, well, go ahead but sooner or later I'm just going to start deleting your comments.
C'mon then RS, tell us why Amazon is a monopoly power.
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