This has been published on Forbes today, written by Tim Worstall:
I really do despise the Tax Justice Network and their ilk. Spreading untruths to make the world a worse place. Well done chaps, oh yes, well done.
Let's ignore the fact for a moment that governments around the world and the EU have been persuaded by our arguments, which Tim, forlornly, tries to tear apart.
Let's also ignore the fact that Tim suggests that John Christensen and I may have been teenage Trots, which is rather far from the truth.
Let's just note his subtlety on this occasion. It's usually a lot worse on his own blog.
And then you wonder why I might get fed up with his followers who frequent the comments section of this blog.
I guess all one can say is if this is the level of his argument he's both lost the plot and is one of the very few remaining in the stage of vehement denial on the issue of tax justice. Most of the world is ready to move on now and accept that our case was always glaringly obvious all along. One day even Tim will, if the anger does not get the better of him first, which I'd rather hope it doesn't.
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Focusing on the key point in Worstall’s article: can you explain why you consider £4m is too low a corporation tax charge for Amazon UK?
From memory, I think your position in the past has been that Amazon UK should be making significantly higher profits than it currently shows? That would presumably mean that we’d have more tax paid in the UK, but unrelieved losses somewhere else.
He does seem to have a point about applying Unitary Tax principles, at least if one uses the sales factor. I think you said that you are moving away from using assets as a factor, which leaves sales and compensation; sales are about 10% UK, and from what I can see there is a similar proportion of headcount in the UK, or slightly less (from a brief search Amazon seems to have about 110,000 employees globally, with perhaps 5,000 permanent people in the UK plus a lot of seasonal ones).
VAT is another matter, of course.
I confess I do not think I have looked at the year in question, so, no I can’t, especially on a Friday night
There are some deeply unpleasant people out there.
Yes, Worstall seems not a very nice man. But his point about Amazon is absolutely correct – on a consolidated basis they’ve historically made a loss, or a very small profit, so by any reckoning they would never pay material UK corporation tax. That’s as true for unitary tax systems as for the existing system.
What Worstall ignores are two things. The first is the history. He has taken a year in isolation. Second, he ignores the abuse inherent in the structure Amazon uses.
Even if his selective data us right (and I gave not checked it) these issues remain wholly relevant and entirely worthy of continuing investigation and continued objection. The ethos of tax abuse appears inherent within the company. Worstall ignores all of that
If they setting a loss off from previous years against current years profits then instead of moving profits around aren’t they moving tax losses around instead? They would be using 10% (using his calculations)of global losses wherever and however incurred against the UK current year profits? Could these losses be set off however they choose and would/could they be verified by UK authorities? not being amn expert in foreign taxation I find the whole business rather confusing.
A) UK profits are in my opinion incorrectly recorded
B) We don’t see detailed tax comps
C) assumptions about loss allocations are just that
What we do know is amazon plays tax games, it has certainly appeared in the past that they may have underpaid tax in the UK although maybe not in the last year when as a group they decided to take heavy losses to promote product and hardware sales, and their add airs are under review in many places.
We know Worstall ignored all that, just as he told blatant untruths about TJN and people connected to it
Thanks for the reply
I think one thing needs to be made clear: Governments and the EU do NOT agree with you that the people you seek to attack contravene the the tax law. If that was the case, then they would be paying tax, retrospectively, on the basis that you claim.
Whether governments and the EU have been persuaded by all your arguments remains to be seen – lets wait until BEPS recommendations come out in September 2014 and 2015. What we do know is that taxation on a unitary basis won’t even make it near the table.
And yes, and there will be major moves shortly on automatic exchange of information – maybe you can take some credit for that.
The whole if BEPS etc would. It gave happened as it did without some degree of political agreement
BEPS has of course been subject to massive corporate counter attack and that will limit impact
But you cannot deny the CBC element is down to campaigners and it does lay the foundation for unitary risk assessment and a greater emphasis on profit split arrangements, whatever you say
That is a big change
So us AIE
We have a long way o go, we admit, but to deny what has happened is absurd
Here is the list of Amazon’s profit (net income) globally over the past decade.
http://www.statista.com/statistics/266288/annual-et-income-of-amazoncom/
It simply does not make large profits, never has done (the best was a little over $1 billion globally, in one year). The last three years were 631 million, minus 39 million, plus 276 million.
Taking the UK to be 10% of the company, in sterling, that implies allocation, on a unitary basis, UK profits of perhaps £40 million, minus £3 million and £16 million.
We simply would not expect there to be substantial corporation tax payments from such numbers. Even in that peak year of $1 billion in profits and using that allocation method we wouldn’t expect a UK corporation tax payment of more than perhaps £15 million.
And Richard certainly knows, unlike some others, that if there is substantial tax haven activity being used to hide profits away from national taxmen that these will show up at that group level. But there just aren’t large profits at group level.
What the company is doing is to use gross margins to finance the expansion of the business. Why Richard complains about this I don’t know. He regularly rails against companies that are just sitting on piles of cash that they don’t know how to invest. Amazon takes the cash it has and does invest: so why criticise them for doing exactly what Richard thinks companies should be doing?
All these points have been addressed many times but what is really interesting is that you apparently despise what I am saying and yet can’t resist engaging.
What? I should just let you get away with stating untruths, persuade the world by your errors, and say nothing?
“All that is necessary for the triumph of evil is that good men do nothing.”?
I should be doing that nothing?
And you say that all of these points have been addressed many times.
Perhaps, just for the clarification of new readers, you could explain them simply?
1) Amazon doesn’t make much in profit globally. Therefore how and why is is avoiding taxes on profits?
2) You have repeatedly stated that corporations should be shamed for sitting on large cash piles that they don’t know how to invest. You’ve even suggested that those cash piles should be taxed away so that government can invest them. Amazon does know how to invest its cash flow: so why are you shouting at them for doing so?
Just so that people don’t have to hunt through thousands of posts and reports and newspaper pieces by you, could you explain those two points, simply and clearly, here?
Tim
Let’s start with the untruths.
You say TJN is made up of people who were Trots. That’s a lie.
You say one of the TJN team lives in Zurich. That’s a lie. The person in question now lives in Berlin. He moved with his wife, who is a Reuters journalist. Your insinuations are blatantly untrue, but facts do not seem to worry you.
You say Amazon is paying tax appropriately in the UK. We doubt it. The structure it uses is clearly designed to shift profit. It says it has no centre of management in the UK. We doubt that too. But you do not answer those questions or seek to justify these facts. If you are not aware, tax avoidance is very often in the structure even if nit in the immediate outcome. That’s the nature of such planning, but you pick your evidence very selectively and with a wilful blind eye.
And for the record, I have never criticised Amazon for investing. That’s another lie.
So the lies and refusals to answer are all yours.
And since you despise my work so much, I will free to delete your response in line with the advice many have provided today.
Richard
I don’t understand your position, as it seems to contradict everything you say about unitary taxation. By what principle do you think a group that makes little or negative profit, on a consolidated group basis, should be paying significant amounts of corporation tax in the UK?
Thank you for your comment.
I have answered your question many times already on this blog and considerable information is available in the public domain.
I regret I am not a personal substitute for Google.
As usual Richard, you seem determined to throw out a host of untruths and misleading statements and then seek to silence anyone who dares to question your claims, despite the lack of evidence to support them.
If you were even half as good as you think you are, you’d be able to engage with those with different views and explain why they are wrong. You never do this though, I wonder why….
🙁
Thank you for your comment.
I have answered your question many times already on this blog and considerable information is available in the public domain.
I regret I am not a personal substitute for Google.
It does seem odd that people want to take Amazon’s UK accounts as some sort of tablets of stone. The idea being peddled is almost Amazon are somehow dumping on the industries they compete in.
Why do they invest and advertise and operate if they are not making money? Are they philanthropists? Not sure even Mr Worstall would argue that so skepticism is entirely warranted?
@TimWorstofall
“All that is necessary for the triumph of evil is that good men do nothing.”
Isn’t it a little pompous to be quoting Burke in the context of an argument about tax? The fact that you see this as a fight between good and evil suggests that your critical faculties are severely atrophied…
Our generous host, Richard Murphy, quite definitely sees tax as a crusade of good against evil. What does that say about his critical faculties?
When people/companies free ride on the labour of others by seeking to duck the expected contributions to the society in which they operate then there is a moral problem to be addressed.
Tim Worstofall appears to believe in some twisted way that Richard Murphy is or represents evil and that he the White Knight is unambiguously a good man. Read his comments above.
If he really were such a good man then he would immediately correct his mistakes and would not publish what he must know are speculations on his part as if they were true.
In my opinion his critical faculties are atrophied because he is tying himself in knots trying to defend the indefensible…as you are yourself.
Even if Amazon aren’t manipulating their accounts to artificially reduce their corporation tax bill, there are very good reasons to dislike Amazon regardless of the amount of corporation tax they pay. For example, the fact that they are anti-trade union extremists: see e.g. http://time.com/956/how-amazon-crushed-the-union-movement/
Worker mistreatment:
http://www.salon.com/2014/02/23/worse_than_wal_mart_amazons_sick_brutality_and_secret_history_of_ruthlessly_intimidating_workers/
A terrible environmental and sustainability record:
http://www.theguardian.com/sustainable-business/amazon
I could go on but that’ll probably do for now.
The fact that they are making very little profit is probably because they are selling books at very low prices to drive the competition out of business – a strategy that seems to be paying off. Once they’ve got an online monopoly or near-monopoly, they’ll be making A LOT of profit, believe me. How long can e.g. Waterstones survive? Most independent booksellers have already collapsed.
A very, very nasty company.
Howard
And then the abusive tax structures they have put in place – which have been the focus of the accusations although Tim Worstall has entirely chosen to ignore the fact – would really kick into play, which is why action to stop them is being taken now by many authorities
Best
Richard
But not so bad that you won’t use them to sell your book…
More hypocrisy…?
Not at all
If we have a near monopolist we have no choice but engage with them
But it is even more important in that case that they are held to account for their abuse of power if that is what they do
Ah, the low prices to create a monopoly then raise prices argument!
Umm, have either of you ever bothered to look at the economic literature on this? The difference between a “monopoly” and a “contestable monopoly”?
The general conclusion by the some thousands of very bright people who have looked at this over the centuries who conclude that as long as a monopoly is contestable it cannot be exploited? Because as soon as it is exploited then that competition arises?
Therefore contestable monopolies aren’t exploited because the operators of them know that such competition will arise?
Would either of you, Reed or Murphy, care to give me an example of where this destroy the competition so we can raise prices has ever actually worked?
As to Howard Reed:
“How long can e.g. Waterstones survive? Most independent booksellers have already collapsed.
A very, very nasty company.”
Are you certain that you are an economist? You’ve read Bastiat, yes? That we should be looking at all of these things from the point of consumption?
Books are cheaper and more available than they have ever been. Please do tell me how this combines with your idea that consumers have suffered?
Tim
You do amuse me. All those books, and as the Queen said “how did you miss the crash coming?”
The answer is easy of course: all those books are wrong. Yes, I know you’ll say I’m wrong, but the unfortunately for you I called the crash.
Why are they wrong? Simply because, firstly, the assumptions made on the way that markets work in that body of material by people who have never worked in them and who have no clue about the nature of the way they work as a result undermines all the conclusions drawn. Secondly, markets are changing but the work you rely on is not. Amazon is not just a near monopoly retailer with a fundamentally different cost base from its competitors it is also now seeking to be the monopoly product producer via Kindle too. I suggest your models do not allow for that. That’s also why, now, books are cheaper than ever, of course.
Change always happens when the rules change. Your models assume they don’t.
That’s why you get so much wrong.
Richard
Tim
Yes I’m certain that I’m an economist. Are you certain that you are? And not just a guy with an undergraduate textbook and an axe to grind? Because I’ve never read anything by you that suggests you have anything other than a very, very superficial understanding even of neoclassical economics, let alone the alternatives.
Well said
p.s. Tim’s comment “we should be looking at all of these things from the point of consumption” – utter nonsense. The production side of the economy is just as important as the consumption side – or least it is for the millions of people in the British economy who are suffering falling real wages and terrible working conditions, year after year, because of the unscrupulous business practices of Amazon and their ilk. The fact that you’ve declared that the production side of the economy doesn’t matter suggests that your grasp of even neoclassical economics is extremely weak. If this is the best you can do I feel deeply sorry for the right-wing blogosphere as they obviously lack commentators with the intelligence to produce any kind of useful commentary.
“millions of people in the British economy who are suffering falling real wages and terrible working conditions, year after year, because of the unscrupulous business practices of Amazon ”
Amazon makes books cheaper and this depresses real wages?
What?
You have no idea that Amazon employs people on pretty appalling contracts?
That says it all Tim
And confirms exactly what Howard said
It’s an unbelievably simple point Tim, to anyone with any economic understanding whatsoever… Amazon’s prices are low, at least in part, because they pay their workers very badly – like many companies. Of course you have edited my original quote “…because of the unscrupulous business practices of Amazon and their ilk” to omit “and their ilk” and then tried to claim that I am arguing that real wages have been falling solely because of Amazon, which would be an absurd claim. But then that’s no surprise, given that you’re not interested in accurate economic commentary, but instead engaging in character assassination based on untruths. Which oddly enough was the accusation you initially levelled at Richard – I would venture to suggest that your (Tim’s) blog might be more successful if you spent more time attacking *yourself* for being shrill, misleading and ignorant. To be blunt: you can dish it out but you can’t take it.
“The answer is easy of course: all those books are wrong.”
That’s certainly a strong statement. The entirety of current economics is simply wrong. Demand curves don’t slope downwards (except for Giffen Goods), there is no principal/agent problem, we do not have both an income and substitution effect to consider when looking at changes in tax rates. Keynes is wrong about aggregate demand being important, about the zero lower bound, Friedman wrong about monetary policy being important, Ricardo wrong about comparative advantage, Smith about the division and specialisation of labour? Marx about the perils of monopoly capitalism?
All things written by everyone in all books about economics are wrong?
I would submit that that’s a tough claim to make.
If you really think supply and demand curves are predictable read Steve Keen
Time to move beyond A level stuff Tim
“If we have a near monopolist we have no choice but engage with them”
That is simply not true and you know it. The “near” (??) monolpolist by definition isn’t a monopolist and you could engage with Waterstones instead. Or you could follow your stated principles to their logical conclusion and not sell your book. Or you could make it available for download for free from your blog.
You, however, have chosen to take the money; I’m sorry, but you did.
Of course you will now tell yourself that this post is “destructive”, “neoliberal”, “time wasting”, any number of things to convince yourself that you are right to delete it and you’re not just doing so because cannot sustain your case.
Thank you for your comment.
It would appear that you are intent on making repetitive and pedantic nit-picking comments which would appear to have as their primary goal the wasting of my time.
What is abundantly clear is that you are not engaged in any form of meaningful exchange from which any advance in understanding might result.
As such I will not waste my time responding further as to do so would be fruitless when I have considerably better things to do with my time.
Howard
If Amazon is a “near monopolist”, to quote Richard, why is it so important that “and their ilk” is added back in?
Because wage rates are not set in single markets but monopolists do dominate single markets
This stuff really is not hard to work out
No, that really doesn’t explain why “and their ilk” is such an important omission here. If it’s monopoly position (and, other than your book, it really doesn’t enjoy and monopoly) is what allows it to pay low wages, then “and their ilk: is irrelevant.
However? Have you got this all backward? You say high prìces will follow a monopoly. You claim it is using low prices to establish that monopoly, i.e.it doesn’t yet have one. But then you say it’s behaviour re low wages demonstrates it’s monopoly position. Which is it?
Thank you for your comment.
It would appear that you are intent on making repetitive and pedantic nit-picking comments which would appear to have as their primary goal the wasting of my time. In this case Howard Reed has already comprehensively dismissed your claims, which are, in any case, as economically meaningless as your comment about my book.
What is abundantly clear is that you are not engaged in any form of meaningful exchange from which any advance in understanding might result.
As such I will not waste my time responding further as to do so would be fruitless when I have considerably better things to do with my time.
“UK profits are in my opinion incorrectly recorded”
Have you audited the accounts? Or are you just guessing?
I stated an opinion with reason given.
It would appear that you are intent on making repetitive and pedantic nit-picking comments which would appear to have as their primary goal the wasting of my time.
What is abundantly clear is that you are not engaged in any form of meaningful exchange from which any advance in understanding might result.
As such I will not waste my time responding further as to do so would be fruitless when I have considerably better things to do with my time.
I will be deleting your further comments for that reason.
Do these idiots, or are they paid wind-up merchants, not understand that almost their every word strengthens your case, Richard?
Love the suitably dismissive cut and paste response by the way and hope it’s getting up their noses as much as they tried, and failed, to get up yours.
PS Hope today’s medical stuff has gone well for you.
Thanks Nick
Wednesday is first hospital day
Richard could you seriously please explain why Tim and your critics are wrong and answer them rather than –
“Thank you for your comment. It would appear that you are intent on making repetitive and pedantic nit-picking comments…”
I must take issue with the comment about Google, firstly Google is not the internet (unless you are from the government or the national press), secondly it does not unearth the truth and thirdly most people do not know how to use it properly (viz search expressions).
BTW I freely admit that my lack of economic understanding comes from never having properly studied the subject. (Maybe I should be chancellor – oh no! they have no idea what they don’t know.)
I really really would like to understand both sides of this argument.
I am sorry
I have documented many times
Check out Jesse Drucker on this
And my stuff in the Sunday Times in 2009 and 2010
I really do not need to rewrite it here