I was asked to comment on Amazon's tax by a number of journalists yesterday. The Mirror has a quote, but it was not all I said, of course. I said this:
Amazon are still playing games in the UK. In the only accounts they publish for the UK they're declaring less than a quarter of the sale they really make here. It looks that they pay less tax here than they should as a result. And when it comes to the tax rate that they say declare, in the US they say they pay 20% tax. But in the UK, looking at the cash they actually pay over, it's a bit over 6%. So it looks like the UK is short-changed.
But we don't know if that's the whole story, or not. That's because we know that Amazon still also trades through a branch of their Luxembourg operation in the UK. But although they publish the accounts of that company as a whole at Companies House what they don't show is how much of its profit and tax paid relate to the UK sales. So Amazon is still leaving us in the dark.
The tax abuse may not have ended as yet in that case. If we only know about one quarter of their sales, and know they only pay tax here at one third of the rate they do oin the US then then they are decalrin maybe only a twelth of the tax that we miught expect in the UK. That would suggest they should be paying more than £50 million when they are actually opaying less than £4 million.
It's time we did know what is happening. And it's time the government took action to stop this opacity happening. That would not be hard. It should require that Amazon publish accounts for all its UK operations on a consolidated basis as if they were one company. That would not be hard to do because Amazon already has to do this as part of its US tax return. Then we'd know the truth. But right now Amazon is leaving us in the dark. And the UK government is letting it get away with this.
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“.. So it looks like the UK is short-changed… ”
Which unfortunately helping to further the myth that UK Gov is a *currency issuer*, and the loss of tax is stopping the Gov spending on the public purpose.
Sure I know, if you’d said something in MMT reality mode, the Mirror would have printed even less, but we have to start talking reality sometime surely?
No Mike you’re just wrong
The UK is short-changed if Amazon does not pay the tax it owes, MMT or not
For heaven’s sake, MMT is important, but if you don’t understand the vital role of tax in it, and the fact that tax has to be paid by all who owe it then you will do as much a disservice to it as Neil Wilson did and will deeply damage its credibility in the process
Please get real and stop spouting nonsense that MMT means that we can be indifferent to the non-payment of tax, because if anything MMT makes that more untrue
It’s not nonsense Richard. Amazon should meet it’s legal obligations, as they exist now, but ‘short-changed’ is currency user speak. The only thing that matters from a macro econ POV is whether Amazon avoiding £50m in tax prevents UK Gov from commanding real resources it wishes to purchase for the public purpose. (And that is not very unlikely.)
And my comment is perfectly coherent with MMT basic principles, which you’ll note in this (short) paper by two MMT scholars, Rohan Grey and Nathan Tankus.
As I say, we have to start changing the conversation to reality sometime, if not now, when? UK desperately needs prominent economists to step up.
“Corporate Taxation in a Modern Monetary Economy: Legal History, Theory, Prospects”
http://www.binzagr-institute.org/working-paper-no-118/
Sorry, but I utterly disagree
First, governments do need revenue. It’s nonsense to say they don’t. They have to have revenue to control inflation.
You can’t spend at will unless you can control inflation. Saying otherwise is just nonsense.
And that paper on CT? Dammit, they don’t even know what the reason for corporation tax is, which is as a backstop to income tax
No wonder they get it wrong
I agree with Richard. Taxes have other purposes than revenue raising. This is a question of a level playing field for other businesses and just common justice. Morality should not be removed from economics.
Carol, I agree that morality is a vital factor in the *application* of economics, but the monetary system is what is. Gov does not *require* revenue in order to spend.
We should not imply that it does and be clear about this distinction. Otherwise we end up supporting the intellectual fraud of current ‘affordability’ limitation to Gov fiscal discourse.
The discourse needs to be based on factual terms. ‘Short changing’ and other ‘household’ type phrases that imply money constraints are wrong.
Mike
I have to say that your are doing a considerable disservice to MMT by writing this type of nonsense, and I am happy to say it. Continue doing this and you will destroy the credibility of the idea and the chance if it ever being used as the basis of policy.
Of course in pure theory you are right. In pure theory so are neoliberals. And we know the harm their pure theory has caused.
The reality is far removed from what you are saying. We cannot just print money ad infinitum and you should know that and stop spouting nonsense that contradicts that. We can only create money if we have a mechanism for controlling the consequence, and that is tax. Ignore that and your theory is a deep menace to society.
Of course, money creation creates the means to pay the tax. You should say so. But that also means you are beholden to think about the social consequences of tax. You appear not to do so.
As it is, I am entirely happy to say that your view of MMT is deeply threatening to it and I even wonder what your motive for writing such nonsense is. Are you seeking to undermine all MMT might achieve? It certainly seems like it to me.
As a mater of fact there are money constraints in society without tax: the constraint is that caused by economic breakdown from excess moeny. If you don’t get that, please refrain from harming the MMT cause.
Richard
Mike
Read ‘The Joy of Tax’ mate – it’s all in there.
Tax is not just a one trick pony.
Richard, where does your 6% tax rate come from?
£4.6 million current tax
£72 million profit
6.4%
There are a some serious points to be made about transparency, where profits are recognised, and properly recognising the value of the prompt fulfillment service being provided by the UK operations.
But I suspect the difference between the headline rate of corporation tax and the effective rate of tax on the UK company’s accounting profit is almost entirely due to the tax deduction for the shares and share options granted to its employees. Are are you suggesting that the UK company should decline to claim that tax deduction?
No, I am saying in what I am saying to the media that we need more data to answer the questions
But the £72m isn’t their profit, there are additional payments to staff that reduce profit by circa £55m.
In the U.K., as with most countries, staff costs are a legitimate expense to be deducted before profit is subject to tax.
Why are you saying that is not appropriate here?
That is their profit before tax
Are you denying that the reason the tax paid is much lower is due to cost of staff remuneration (the vesting value of employee shares)?
And as such, the £72m is not the relevant figure, so your 6% tax calculation is meaningless?
Give me the correct data
Tell me why the accounts do not reflect the reality?
And answer th3 question, are they true and fair in that case?
The best argument that the neoliberals have here is that the £55m deduction from profits for share based awards will actually mean that the government collects more tax.
Let’s say you are Amazon and Corporate Tax is 19% ( not sure, someone keeps changing this ) and to avoid paying more of this then you give as much as you can of your profits to your workers who are going to pay income tax at between 20 and 45%. Then the government is collecting more tax than if the share award wasn’t paid. The argument goes further into depraved areas when you consider that some of the workers will be on benefits and they will see their extra income reduced because of the taper rates of tax credits, Housing Benefit and Universal Credit. The most extreme of these is Housing Benefit with it’s 65% withdrawal rate. So the government saves on its benefit bill to workers needing welfare.
The trap the neoliberals have walked into here is in thinking that making the government better off is the point of the exercise. It’s not. If the government has more money coming in than expected they will recycle it back into spending in most cases and that will be inflationary when it works through into increasing the prices charged by suppliers of services goods and labour to the government. And inflation is to be avoided if it’s excessive.
I have more on this to come….
Ref Andrew’s comment. This is from the BBC business website.
‘One reason for the lower tax bill was a rise in share-based payments for staff.
Amazon said that full-time warehouse staff on average have received shares worth more than £1,000 a year.
As Amazon’s share price has risen so sharply, these are often worth more when they are sold to the open stock market. That sale price is the one on which the tax bill, for both the company and the individual, is based.
Amazon UK Services, the division that runs the warehouses that process, package and post deliveries to UK customers, paid out £54.8m in share awards, compared with £36.7m in 2016. Turnover was £1.98bn, up from £1.43m.’
It would seem that Amazon are using profit to pay their staff more, rather than CT. Won’t the overall take from the staff be more than CT?
Who knows?
My whole point is just that
Your claim is what?
Your 6% tax rate is a meaningless number as it doesn’t take into account this entirely reasonable deduction for the cost of staff benefits.
So in actual fact, their tax is £4.6m on £22m of actual profit which is just over 20%.
Suddenly there doesn’t seem to be much of a story (unless you think that higher wages for staff are ‘bad’ or an inappropriate tax avoidance measure…
Oh dear: why don’t you read the accounts?
The profit figure is quite explicitly stated after the deduction of £55m of cost for the shares
The accounts are correctly stated
The £55m is an expense
It does not (indeed could not) be deducted again as you claim
And you really are no accountant, very obviously
I think you need to stop pretending that you are
You said they were playing ‘tax games’ – they may be with other issues as Andrew has pointed out. However I don’t think paying staff more rather than CT is a ‘tax game’ particularly as A keep being accused of not paying their staff properly.
The deduction is in the accounts
I have read them
I know exactly what is going on
Do you?
You haven’t explained anything.
If you ‘know what is going on’ why don’t you explain.
Every other source seems to mirrorvwhat I’ve said above…
Do the double entry
I am right
And just read the accounts
I am right
I bothered to do that
And the learn some deferred tax accounting
The accounts are available here. https://beta.companieshouse.gov.uk/company/03223028/filing-history
What is the large negative adjustment in note 8b?
A tax timing difference in the treatment of the share payments
Past awards have crystallised , presumably
If Amazon and EY had any sense (and neither seems to have) they’d have gone out of their way to explain exactly what this does mean rather than leave us guessing. That is why I am criticising the accounting.
But what is true is that the charge is in the accounts
So it’s exactly as I said. The offset is due to remuneration to staff, in the form of company shares. So thing remotely dubious whatsoever.
Please explain what ‘tax games’ Amazon is playing and what HMRC are letting them get away with.
It seems this is entirely as most informed people would expect according to HMRC guidance:
https://www.gov.uk/tax-employee-share-schemes/share-incentive-plans-sips
With respect you suggested they got the deduction twice
And I am nit here to teach first principles to someone who is willing to name call but does not know what he is talking about
HMRC have seen more than you of the tax position and are in agreement with Amazon.
Should we believe the true tax experts of HMRC, who know the law inside out and have seen all the facts, or you, who have lots of opinions and a biased agenda?
As for explaining themselves, Amazon have to explain themselves to HMRC and not you.
If you think there’s a duty to explain, why do you never explain YOUR tax affairs to us?
Have you actually read what I said?
Go and do so
And then you will realise what you have said is complete nonsense and wholly unrelated to the comment I made
I think the micro-analysis of Amazon UK’s tax provisions rather misses the point, and Steven Parks has completely missed it. Those in HMRC who will deal with their accounts and Corporation Tax returns (and somebody will specifically deal with them) will be well capable of working out how much Corporation Tax should be paid based on what is shown in those accounts.
I say misses the point because if there is anything in these company accounts which should give any cause for concern then it is likely to start in the top part of the P&L account, with the realisation that all of the turnover derives from transactions with affiliates. This is a company which has not paid a single dividend since Amazon acquired what was presumably a fledgling business in 1998. Amazon now has £700M capital tied up in it. Turnover has risen from £17M in 2000 to £1987M in 2017. Its operating profit has never been greater than 5.3% (and for a good part of the time has been significantly lower than that), and in four of those eighteen years it actually reported an operating loss.
I don’t think I need to join the dots any more than this…
I have made the point here and on air and in articles to come in print that the issue is not the tax bill, per se. We simply cannot tell whether that is right or wrong.
The issue is also not online v retail. At just one site Amazon pays more than £2 million of rates – as much as many large stores pay. I am not defending the business rate system. But the issue is niot as unlevel as some claim.
Rather the issue is the opacity that means we cannot tell what is happening here.
And the issue ahs become VAT – where we know the Amazon platform has been used for massive fraud and only too late has HMRC begun to require action of AMazon on an issue that it knew was real and did nothing about.
There are issues. But the size of the CT bill may be the smallest one.
Interesting tweet yesterday from Andy Wightman (Scottish Greens MSP) –
“The fact that Amazon Distribution pays more to Fife Council in non-domestic rates (£2,073,588) than it does to UK Treasury in corporation tax (£1.7m) is a reminder of how important land & property taxes are & how they can’t be avoided.”
Basis of NDR calculation: “Scottish Assessors website – gives all valuations then use ScotGov online calculator”. I guess the same could be done for all their warehouse sites.
I don’t think Andy is suggesting their NDR “contribution” absolves them from paying all the other taxes they are due.
Agreed
I quoted this on 5 Live last night
Andy is a reliable source
Sorry I missed you, there’s not usually much sanity on 5 Live.
I have noted your comment elsewhere about the “terms of the interview” point, and hope things are going to improve. (Some of their regulars leave A LOT to be desired.)
I agree….
“With respect you suggested they got the deduction twice‘
I suggested no such thing – which of my posts do you think said anything if the sort?
You said the profit had to be reduced by the cost of employee share bonuses before calculating the tax rate
But the profit was already stated after that sum
Now you cannot follow your own argument
You are wasting my time
Please don’t call again
It’s pretty obvious that the current tax number is reduced by the share options granted to employees in previous periods. You can see it in the tax note. They could be clearler about what periods have crystallised I guess but it’s hardly sophisticated avoidance.
And that is what I have said
But my point is quite different: it is that the accounting needs to require that Amazon disclose all their activities and all their tax paid
Dammit, I have said Amazon may be paying all the corporation tax that they owe. But they need to prove it
What the heck is wrong with that?
It does not let them off the hook on VAT
prove it to whose satisfaction? yours? presumably they have complied with the accounting disclosure rules and I doubt they have submitted their tax returns for that period yet so I am not sure what your argument is to be honest.
Yes, to my satisfaction, if you like
You may not know this, but all change happens because somebody has a good idea, and asked for it. It doesn’t happen because no one thought of it. A person, just one at the start, has to think it a good idea
As it happens, I am not alone in thinking that current accounting disclosure rules are dire. The FT has criticised them in the last week
We have 20th century accounting for 21st-century needs, and an utter failure of accounting to hold companies accountable for their stewardship of the assets with which they are entrusted
Are you really saying that I am not allowed to point this out?
And are you really saying I’m not allowed to demand change?
Do you know how democracy works?
And are you aware that, like it or not, I have a personal track record of effecting change in this area that may be stronger than that of anyone else on the planet right now?
Could you prove to my satisfaction that the tax you have paid reflects the income you have received over the last half dozen years?
You say you don’t have to. Because everything is declared to HMRC.
That is what Amazon says. And you criticise them and the system for it.
Double standards.
I have not asked to see Amazon’s tax return
I never have
I ask to see their full accounts
I publish mine in full voluntarily
No hypocrisy at all
And so modest with it!
Indeed