The Guardian features this article this morning:
It's about the absence of anticipated tax payments by Amazon in the UK, based on reasonable extrapolation of its worldwide profits and declared overall UK turnover.
I was interviewed for the article. I am quoted:
Richard Murphy, professor of practice in international political economy at City, University of London, said: “If it wants us to believe it is paying the right amount of tax it has got to give enough information. No accounting number makes sense in isolation.”
However, Amazon tried to fend off accusations of tax underpayment by issuing a separate statement on Tuesday saying it paid £220m of direct taxes in the UK across its entire British operation last year including employer's national insurance, business rates, corporation tax and stamp duty.
It did not break this down to reveal the amount of corporation tax paid by its UK operation, which had total sales of $14.5bn (£10.9bn) last year, according to the group's annual report.
Murphy said he would expect Amazon to pay at least £100m in corporation tax alone at its UK business, assuming that it made profits at a similar rate to the group as a whole. “There is clearly an underpayment to explain,” he said, calling the payment by Amazon UK Services “the square root of diddly-squat”.
I joked that the journalist would not use that comment. I was wrong. But I'm right about this:
Murphy said the company would be under pressure to publish more transparent accounts as it was becoming normal practice for companies to “reveal and explain” their tax bills.
It's time for full disclosure and country-by-country reporting on public record. Nothing less will do.
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Couldn’t agree more Richard but….
Given that we have a PM whose relationship with truth and honesty is, shall we say, tenuous. He also has a record of being somewhat tardy in maintaining an honest record of his interests on the HoC register. Add to that the Chancellor is an alleged tax avoider who has pimped risky CDO’s for a living. On top of that the Leader of the House is set to make a lot of money by exploiting such issues through his new Dublin EU offices, so all in all I think the chance of getting any traction on this issue is remote.
I was with you until I actually read the Guardian article. Now I can’t help but think that both they and you are deliberately trying to mislead us.
From the Guardian:
“Amazon UK Services, the company’s warehouse and logistics operation…..”
So this is just the logistics arm of the company, not the retail arm.
“Amazon does not reveal profits or corporation tax payments for its entire UK operation….”
Yes it does, actually. Amazon EU Sarl, UK Branch. Easy enough to find the accounts at companies house. If you had read the accounts for Amazon Services Ltd you would also have noticed this, as it tells you in the accounts.
Then let’s turn to your blog, bearing in mind we now have the accounts available for the UK retail business as well.
“It’s about the absence of anticipated tax payments by Amazon in the UK, based on reasonable extrapolation of its worldwide profits and declared overall UK turnover.”
Well, for starters you simply can’t extrapolate like they way you have done. Profits in one country are not going to being directly proportional to profits in another.
Secondly, as any accountant or economist should know, turnover does not equal profit.
Lastly, we do have the accounts of Amazon EU (UK branch). And they show in 2017 it made a LOSS of £876m, but still paid £55m in direct taxes. No profit, no corporation tax due.
“And that’s the issue: Amazon does not give us the data we need”
Looks like they do, actually.
“It’s time for full disclosure and country-by-country reporting on public record.”
They actually publish accounts for all their EU branches separately, so the information is available. They just don’t do it in the way you want them to. And I am guessing you haven’t bothered to do any real research on the matter before commenting, as otherwise you would know this.
So as far as I can see it, Amazon do publish the information you want them to and aren’t avoiding corporation tax. So both the Guardian article and your own are little more than deliberately misleading (certainly by only looking at the warehouse and logistics arm and then calling it Amazon as a whole) hatchet job.
They pout out the press releases
They out out ridiculous claims about all the tax that they pay
I said out all your cards face up on the table about all you do
And, I said, do it in the con text of country-by-country reporting so we get the whole story in one place
No, not all that got in the Guardian
But I do know exactly what I am talking about
And yes, you can extrapolate and the future of tax will be based on doing so: don’t doubt it
OK, do you deny that the article is written to obfuscate the real situation?
Why else would it focus so heavily on the profitable service company, which pays some tax but optically “too little”, but ignores the retail arm which pays a lot of tax whilst making a loss?
The only reason I can see one would do this is to create a story claiming Amazon pays too little tax.
Which if you look at the numbers, isn’t the case. Between the two companies they are losing ~£800m a year, but paying ~£60m of tax.
As a tax expert and accountant, surely you should have corrected the Guardian on their mistake? As it is though, you have made exactly the same mistake and moreover have tried to further their argument by claiming Amazon should be paying more tax based on some guesswork – simply apportioning profits. Which any serious accountant knows simply isn’t sensible or correct.
As for country by country reporting. It is a rule now, but one widely seen as essentially useless. As far as I know, there have been no actions taken on the basis of CbC reports, there are no significant penalties which can be enforced based on such a report. Specifically because – again – simple apportionment based on turnover, profit, staffing levels or anything else is too simplistic and inevitably wrong.
So no, you really can’t extrapolate. CbC reporting doesn’t give you the whole story in one place at all. You just get an amalgamation of data, which may or may not give you any sensible information. Case in point – Amazon UK is losing money. Yet by your logic (which is the same logic as CbC) it should be paying more tax – because global profits are apportioned.
The reality is that it is quite normal for a business to make money in one region and lose money doing a similar thing in a different region.
Amazon are even good enough to spell out all their inter group transactions in their accounts. You could have gone through it, looked at the various sets of accounts and given an evidence based answer.
Instead you performed a hatchet job. Both your article and the Guardians are deliberately misleading. You knowingly ignored the retail arm of the company in the UK then made a guess that they should be paying more tax – with no evidence to say so. The reason being, I assume, to further you own profile and “tax justice” agenda.
How is it justice if you are deliberately lying about what they pay and what they should be paying?
It’s not even ethical. How do you square writing misleading articles such as the blog above, whilst purporting to hold the ethical standards required of accountants?
This article as far as I am concerned is saying Amazon is not giving us the data we need
And I will also say I do not believe Amazon any less profitable in the U.K. than the US
I know that in fact. If it was it would have pulled out long ago
This is a single global entity with a consistent core business which is mature in the UK
That means the assumptions I use are entirely valid
And your claims are not
I’m sorry but what you are saying is not very realistic, correct or even true.
Amazon do give us the information we need in their accounts. They also publish separate accounts for their various entities and the transactions between those entities. What more do you want? It sounds that really the only thing stopping you or anyone else getting the data is laziness.
“And I will also say I do not believe Amazon any less profitable in the U.K. than the US”
Do accounting and taxation now rest on your beliefs? It is ridiculous to imagine that global businesses are equally profitable all across the world.
“I know that in fact. If it was it would have pulled out long ago”
“This is a single global entity with a consistent core business which is mature in the UK”
How do you know that? Doesn’t the FACT that Amazon wasn’t profitable for the first 14 years of existence rather suggest that you are wrong, and companies will invest up front and stomach costs and losses in the short term to seek profits in the long term?
“That means the assumptions I use are entirely valid”
No, they really aren’t valid at all. Tax does not work like that. You can’t just apportion profit and taxation across borders in a unitary fashion. Doing so gives nonsensical answers, which is by and large why CbC reporting has achieved nothing.
“And your claims are not”
My claims are based on the accounts of the two Amazon UK companies. Fact. No assumptions necessary. Unless you are claiming that Amazon are lying.
You claims are based on guesswork.
Tax does not involve guesswork. I assume you are able to tell us EXACTLY how much tax Amazon should have paid, being a tax expert, because otherwise you are simply making exaggerated and untrue claims.
I can assure you – I am told that CBC has had a big impact
Your claim on that is wrong
The rest follows…..
I have heard this sport of nonsense for so long now
Perhaps you should ask why a company will allocate resources to non-profitable activities for so long and still think it worthwhile doing so when otherwise they’s Be making vastly more by sticking to the US alone – and remember that for them the UK is a mature market
The answer is the cross subsidy of course
The whole BEPS project was designed to reveal that
But you remain in denial
Now stop wasting my time. My case on this has been proven: CBCR is the global norm now and it so happened I created it. I have some reasonable grounds for saying my intuitions are grounded
“I can assure you — I am told that CBC has had a big impact”
Are you so sure? How many enforcement actions have their been on the basis of CbC reporting? I can tell you the answer is precisely zero. So doesn’t seem like a big impact there.
We can also see what the OECD BEPS group say about CbC. I quote from the latest peer review:
“CbC reports which are received can be used only to assess high level transfer pricing risks and other BEPS-related risks and for economic and statistical analysis where appropriate; and cannot be used as a substitute for a detailed transfer pricing analysis or on their own as conclusive evidence on the appropriateness of transfer prices or to make adjustments of income of any taxpayer on the basis of an allocation formula.”
So basically the OECD are saying it is not useful for assessing transfer pricing risks or how much tax should have been paid.
“Perhaps you should ask why a company will allocate resources to non-profitable activities for so long and still think it worthwhile doing so when otherwise they’s Be making vastly more by sticking to the US alone — and remember that for them the UK is a mature market”
I am really shocked by this statement. You can’t be serious, surely? Amazon itself wasn’t profitable for 14 years. Do you think they should have just stopped immediately? Or do you think all businesses should be instantly profitable? Or is it that you think when a business makes an annual loss it should instantly shut down?
Of course in the real world, business means investment first, profits later. Some businesses plow all their revenues back into more investment so often don’t turn a profit for many years. That doesn’t mean they are not worth something.
“The answer is the cross subsidy of course”
OK. So where is it in the accounts? Because looking at the accounts (and they detail cross investment within) it seems that this isn’t the case. It is simply a loss making business at the moment. So you are just making stuff up.
“Now stop wasting my time. My case on this has been proven: CBCR is the global norm now and it so happened I created it.”
Your case hasn’t been proven. You are making claims that Amazon should be paying more tax in the UK. You have no evidence or this. The FACTS from their accounts show it is a loss making business, so given they are already paying ~£60m in tax in the UK you should be happy.
And if you don’t mind me asking, if you created it why aren’t you involved in the current review process at all? If you are CbC’s creator shouldn’t you be there guiding the process – after all who knows it better than you? Yet I can’t seem to find any record of your involvement bar a submission to the OCED BEPS group.
“I have some reasonable grounds for saying my intuitions are grounded”
Like I said before, intuitions are not fact. When you present some, then maybe you would have a case. but as it is the facts are saying Amazon are not avoiding tax in the UK. You need evidence before you can make claims – and it looks like your claims are simply untrue.
You can be shocked by what you like
But since you clearly have not a clue how OECD diplomact works I’ll assume you have little clue about the rest as well
In fact, I know you haven’t because what you’re saying is BEPS does not happen
Bluntly, stop denying reality
We’re bored with people who do that
What are you talking about?
I’m not denying that CbC exists, or is part of BEPS. I am saying (and so are the OECD, more importantly) that it “cannot be used as a substitute for a detailed transfer pricing analysis or on their own as conclusive evidence on the appropriateness of transfer prices or to make adjustments of income of any taxpayer on the basis of an allocation formula”
But we are going off topic. The real matter in hand was that you are claiming Amazon UK owes more in taxes. You seem to have plucked a figure out of thin air for this number.
The accounts show they do not owe more in taxes, because they are making a loss.
Do you have evidence to prove your case, not just your “intuition” or assumptions?
If so, publish it and call Amazon liars, and I am sure HMRC will happily enforce it.
If not, it looks like you are simply making things up to suit your tax “justice” agenda, promote your own profile and are promoting a false narrative.
I do find it very hypocritical that you are willing to peddle unverified claims about a company, which could damage their business. There is nothing just about that and it is incredibly unethical.
I have laid out my suggestion on an apportionment basis
That is where we are going with corporation tax – and I promise you, the OECD knows it
And I have not accused them of lying
I asked for their full country-by-country reporting
Can you provide the link?
If not. shut up, I suggest
“I have laid out my suggestion on an apportionment basis”
So a basis that has no standing in law or accounting then? What it is and what you think it should be if the world worked the way you want it to are very different. This by direct inference means your claims are wrong. The law as it currently stands means the tax Amazon has paid is the right amount.
“That is where we are going with corporation tax — and I promise you, the OECD knows it”
Unitary taxation isn’t going to happen. The OECD articles block it, as do US tax law. Very few countries are in favour of it, so good luck with that.
Regardless, see above. What the rules are now are what matters to working out what tax Amazon owes. Not what you think the rules should be.
“And I have not accused them of lying”
I quote your article above.
“Murphy said he would expect Amazon to pay at least £100m in corporation tax alone at its UK business, assuming that it made profits at a similar rate to the group as a whole. “There is clearly an underpayment to explain,” he said, calling the payment by Amazon UK Services “the square root of diddly-squat”
So you are saying they should be paying a lot more tax. The implication being that they are doing something nefarious to reduce their tax bill. Amazon say they aren’t doing any such thing, and their accounts show this is the case. Therefore, in simple terms, you are accusing them of lying.
“I asked for their full country-by-country reporting”
Which won’t show you anything different. But if you bothered you could get the information from the accounts of the various subsidiaries (and there really aren’t that many).
You can’t just go around making accusations without evidence. Which is EXACTLY what you have done. That is not how it works. Innocent until proven guilty.
It is also not their job to prove to you that they are paying enough tax in a format you deem appropriate. You just aren’t that important. The information is freely available were you bothered to look at it, and able to understand it. The only people they have to convince are the relevant tax authorities – who don’t seem to be taking Amazon to court about their tax payments.
So by making these claims you are slandering Amazon, with no basis of evidence to back up your words. To do this in your profession would normally be called unethical.
But I suppose it is one rule for so-called “justice” campaigners and another for everyone else?
If you do not understand unitary apportionment,ent – on which I quite reasonably base my argument -then admit it
But your problem is, it is an argument with a sound economic foundation
And you’ve just got abuse
You and all your futile friends will be deleted from now on
I have a pretty good idea what Unitary taxation and apportionment means – but that really isn’t the question here is it?
Let me ask you a VERY simple question. Is unitary taxation the law as it currently stands?
If not, then your argument holds no water. We tax companies on the law as it currently stands.
Claiming that the law should be different is not the case you were making in the your article or the Guardian. You were just claiming that they are avoiding £100m. This has no basis in fact.
You are now trying to turn the argument around and claim you were saying something different the whole time. If you explained that in the article you might have a point, but you didn’t. You just slandered Amazon to promote yourself and your causes.
Avoiding is getting round the law as it stands
And that was nit my article
The interview was 25 minutes
I explained the whole unitary logic
I explained the data issues
I explained the data issues
And yes, BEPS is designed to beat abuse within the law
And you do not even know that
You really are a complete novice at this
Go and do some learning, I suggest
Start with learning how journalism works
Then avvoumtimg in some detail
Then about tax abuse
Come back in five years, maybe
‘They out out ridiculous claims about all the tax that they pay’
Just to be clear, you are saying they are lying about the tax they actually pay ?
No
I said we need more data
I am also suggesting I do not believe their profit apportionment ratios
But I did not say they are lying
I offer arguments, not silly comments
Sorry to labour the point, but what is ridiculous about their claims on the tax they pay ? They either pay the tax they are stating, or they do not.
Ridiculous is a subjective judgement, whereas the statement they make on the tax they pay is either true or it isn’t.
No one is disputing they pay that tax
The question is whether the profits apportioned to the UK are appropriate
If they are not nor is the tax
Tax is not a black and white issue
Richard you have been absolutely slaughtered in this discussion.. it happens often!..even your guard dogs (PSR, Andy Crow etc) are not getting involved because the substantive argument is not on their side.
You think I’ve been slaughtered?
What, by a bunch of corporate trolls who don’t admit who they are and deny there is profit shifting?
With respect, I am well aware that out there in the world where real tax experts work they know full well that BEPS goes on and the need is for the data I am suggesting and for unitary taxation – and both are on their way, let me assure you again
Have I bothered then to engage with idiots then who are making up claims like I said Amazon lied? No. Why? Because a long time ago a wise friend told me fighting pigs was not a good idea. They enjoyed themselves and you got covered in shit for no gain.
I have heeded his advice
Suffice to say – I concede nothing and am entirely satisfied I am completely correct in my arguments – which no one has challenged with a counter-argument: you’ve all merely asserted. You need to get out of the trough
[…] The right-wing, anti-business having to pay their fair share of tax brigade were out in force on the blog yesterday. They were incensed by my comments in a Guardian article in the amount of tax Amazon paid last year, which I quoted yesterday. […]