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.
I have to admit I have little time for these dinosaurs. I use the term with care: they subscribe to a form of groupthink that attacked tax justice, corporation tax reform and country-by-country reporting a decade ago on the basis of three logics.
The first was that tax avoidance was good for shareholders and so society. Even big business in the USA has formally abandoned this position now.
The second was that transparency is bad. This ignores one of the most basic tenets of so-called free-market economics which makes clear that transparency is a requirement if monopoly abuse is to be avoided. Their opposition to transparency puts them firmly in the side of abuse then.
Third, they ignore the fact (and fact it is) that the only justification for multinational companies is that they are, supposedly, better allocators of resources than the market itself. That suggests that either the claim that Amazon has been loss-making in Europe for well over a decade whilst making good margins in the States is indication that they're a crap company at allocating capital or that the accounts presentation is misleading. And we know full well that misleading accounting has been a major feature of tax avoidance activity (the whole of the Base Erosion and Profit Shifting Initiative of the OECD is essentially about it) hence full disclosure being demanded by country-by-country reporting, this last suggestion is entirely reasonable and requires none of the hysteria that this group of commentators have generated.
Fourth, and quite absurdly, they seem to think the Guardian article reflected all I said and was under my control. The naivety is quite staggering.
So let me patiently explain my logic.
Amazon publishes partial data. We do not have full CBCR for it. So we do not know what is really going on within its group. That was my main point, made to the Guardian.
In the absence of full country-by-country reporting data, which we know that they are now legally required to have, we are entitled to ignore their partial data and the claims that they make about it, which we have no reason to think are the complete picture, which complete picture we know they are in possession of and choose not to publish for reasons we can presume to be in their best interests and so not ours.
We must then appraise what they do using the only reliable data we have.
We know their global accounts.
We know the UK total sales figure: they publish it.
We can presume - because economic theory tells us that this is what a company will seek - that they expect equal returns on capital across their portfolio unless they explain to the contrary, and as far as I know they don't explain in that way.
So we can assume UK profit is actually proportional in real impact, regardless of where recorded, to global profit.
That would imply a bit over £500 million of UK profit in 2018 at reasonable exchange rates.
And so tax should be about £100 million.
And it isn't. It's much less.
Now much less might be right. But, and I stress the bit, only if they explain why. In full. With logic as to why they continue to support loss making operations when it would seem utterly logical for them to retreat from Europe as they would make more by doing so. Shareholder capitalism would require nothing less.
What I am saying then are three things. One if publish. The second is explain. The third is let us decide. These are the principles of all good governance codes, so there is nothing odd about that.
And in the absence of opportunity we'll decide based on well-reasoned heuristics, which is what I have done.
Those who protest appear to get none of this.
But then they're trolling for a lost cause. And that's why I won't be letting their abusive style of commentary appear in response to this post. You have been warned.
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Your Tweet yesterday reminded me to get on with closing my Amazon account – again. I had done so a few months ago but reluctantly opened another for one item for my ‘Brexit cupboard’ which I simply couldn’t find in shops or elsewhere online. ( Amazon sure has a scary grip on the market? ) It isn’t a simple click of a button – one needs to send them an email. Nobody argues with you they just want confirmation that you understand the consequences. I didn’t have Prime/photos etc. and stopped using my Kindle some while back to buy any more eBooks. If anyone is moved to do so, search for ‘how to close my Amazon account’ on any search engine
( mine isn’t Google – same reason ) should start you off on the road.
@Hazel
I’m the same, I’m genuinely gluten intolerant (diagnosed 1990) and sorghum flour is very useful when baking lots of stuff and I ran out. I live in Dundee and CANNOT buy it locally. I have scoured all the ethnic food shops we have and asked for it as well.
The only place I can get it is Amazon. I’ve just ordered some as I’m out. Made a big bag of a sorghum rich flour mix. Bread is poorer without it, the spaces in the bread are too large. Muffins absolutely require it as do teabread and doughnuts (ring variety and sourdough to boot).
Flours like potato starch, tapioca flour, glutinous rice flour (potstickers, Yorkshire puds/toad) can be had cheaply in the Chinese supermarket. Asda for rice flour, GP flour, Sainsbury’s for buckwheat flour (bread, pancakes, pasta, those doughnuts etc). But sorghum? Amazon, with ‘free’ shipping. 2kg only 99p more than 1kg.
I too try not to use them unless I have to. I hate what they’ve done to booksellers. Their search algorithms suck sometimes.
Peter, it’s a bummer when you have no choice, but health comes first. Did you search Perth? Can I ask around for you?
We only have a Waterstones in Perth so I now use Hive.co.uk if I want a new ( rather than charity shop ) book. They also supply ebooks etc. I give my portion of proceeds to Aberfeldy bookshop – but you can nominate anyone in their network.
Also available on ebay
Real Foods, Edinburgh – and lots of other good things too: https://www.realfoods.co.uk/product/22909/sweet-white-sorghum-flour-gluten-free
We can presume – because economic theory tells us that this is what a company will seek – that they expect equal returns on capital across their portfolio unless they explain to the contrary, and as far as I know they don’t explain in that way.
Can you point me to that theory? It doesn’t seem to make sense to expect everywhere to be equal. Different countries have different cultures, minimum wages, subsidies from government, planning ease, different levels of unionisation and different levels of human talent. And countries are always changing as some become prosperous at different rates, change governments and more.
Neither does it make sense to have an expectation on companies to explain it. It would be interesting but it’s a bit illiberal to expect it, and presume something that just ain’t so if they don’t.
The logic is simple
If they’re maximisers – and that’s what economic theory says – and they can choose where they work – and they can – they will only work in the places where there is maximum reward
They seek to show that is not Europe over many years
And that makes no sense
And for the record, it is wholly reasonable to expect companies to explain this. Maybe you have not heard of the stewardship function. I suggest you go and look at it.
I suggest you do some reading and thinking
Hi Richard, I am no economist but surely John French has a point. Amazon is a business seeking total global market dominance, some might say it already has it. Predatory pricing is part of its model and that requires reducing short term profits for maximum gain later, presumably on a market by market basis depending on the local points John mentions.
So it is cross subsidising for one overall profit
Which exactly proves my point
Tehere is one business, one model, one profit
And it needs to be apportioned as it cannot be split artificially between jurisdictions
Which BEPS acknowledges
Hi Richard,
Can you please explain what is mean’t by ‘stewardship function’ and where one can go to learn more about what it is?
Many thanks,
Try Google
I am not a substitute
John French
You might want to read Jonathan Aldred’s latest book ‘License to be Bad’ which also acknowledges the maximisation culture Richard speaks of above as well as books by Will Hutton, Steve Keen, Satyajit Das, Paul Krugman, Joe Stiglitz to name but a few.
The list is endless and this perspective is well embedded in contemporary critiques of modern capitalism.
Richard,
I have followed the last post on the subject with interest, and now this one as well.
Having done some research in the subject, I am inclined to agree with the poster who thinks you have acted unethically.
As an accountant myself, I am obliged to report you to the relevant authorities for such behaviour. I am sure you understand and would do the same – in fact I believe you have for much less in the past.
Have a nice day.
Feel free : it is of course your right to waste the ICAEW’s time as others have done before now
I have already explained my logic
It’s wholly appropriate and not in the slightest unethical
My logic is impeccable and sound, nad happens to have been used many times in the media before
I’ll be entirely happy to send my blog from this morning to the ICAEW
But your own comment that I have reported for much less reveals your ignorance: I have done no such thing. The matter you refer to was brought by the CEO of the ICAEW.
It will be most interesting to see the ICAEW tak action against an accountant for asking for improved accounting and for appropriate tax to be paid
I think the ICAEW will be interested to see you behavior, and obvious lack of accounting and tax knowledge, but I wasn’t actually thinking of them.
Your logic rests upon your interpretation of an accounting and tax system that doesn’t as yet exist. It would be one thing to claim that if the law was changed Amazon would owe more tax, but at no point do you make that clear.
You go to great lengths to insinuate Amazon are avoiding tax through subterfuge. You have no evidence for this, and this amounts to libel. Something I am aware you are familiar with. Libel is by it’s very definition unethical.
I have taken a copy of this and the other blog to make sure you can’t hide your appalling behavior. Please feel free to send your own copy to the ICAEW though. The ICAEW do take action against people for sub-standard practice and unethical behavior.
I think it stands to your lack of character that you are even claiming that you had nothing to do with the case I referred to – claiming that the CEO took the action. What you fail to mention is that you left him with no choice by making a complaint about the individual concerned directly to him. So not only are you pathetic enough to go after someone who had the temerity to criticize you, costing them their job, you also are vile enough to lie about it afterwards. I understand you also gloated about your “victory” afterwards.
Don’t worry though. I’m sure what goes around comes around.
I think you just lost your case, by the way, but feel free to continue.
And please feel free to mention that I once pointed out that Google didn’t pay the right amount of tax using the same logic.
And I think I did it to Apple too.
You might add Starbucks come to that.
Throw in a few others as well if you like. I’ll mention Facebook.
And find all the references: there are loads of them.
And for the record, none have sued for libel.
And why not mention that CBCR is a complete failure and I should never have created it as well, I suggest? After all, it’s only based on the logic I used here.
And for good measure say that the OECD should never have adopted it because clearly I know nothing about tax or accounts?
And you might report all accountants there for trying to discover tax not paid by subterfuge as a result of the BEPS programme – which does not once suggest illegality.
Add then you might mention that the GRI should not have appointed me to their committee wriiting their version of CBCR.
Oh, and mention that David Cameron should never have supported it either at the G8.
You might as well be comprehensive if you’re going to start
Alternatively, you could stop wasting weveryone’s time, because your comment is a clear giveaway that this is you making comments about someone you don’t like on a blog and in the process making some rather odd suggestions, including about the CEO of the ICAEW
And you might want to look at the ethical guidelines about claiming to be an accountant without evidencing it as well.
As I say feel free to complain. That’s your right. And I will respond as appropriate.
I noticed that the CEO of the Fair Tax Mark mentioned Lush in the Guardian article.
Lush happen to publish full Country by coutrny reporting in their accounts.
So, if what you say is true:
“We can presume – because economic theory tells us that this is what a company will seek – that they expect equal returns on capital across their portfolio unless they explain to the contrary, and as far as I know they don’t explain in that way.
So we can assume UK profit is actually proportional in real impact, regardless of where recorded, to global profit.”
Then surely this will be the same for Lush? Where we have the exactly data that you say we need from Amazon.
But having looked at it, it isn’t. So what has happened?
Are Lush not telling the truth in their accounts, or is what you are saying about proportional profits just wrong?
I think your will nite Lush explain the variations
Which was my point
But you ignored it
I’m looking at Lush’s accounts right now, and they don’t explain why the profits aren’t apportioned like you say they should be. They have a few specific notes, but that is all.
So, if Country by country reporting doesn’t tell us what Lush should be paying in tax, why would it suddenly work for Amazon?
You can’t have it both ways. Either country by country reporting is right, at which point Lush have their accounts and the amount of tax to pay wrong, or country by country is wrong.
Which is it?
I am well aware Lush have [provided such comment, in particular re Japan
So with respect, you are wasting my time
Show me the same data for Amazon might you. That is what I said was needed. If you can’t, I’ve made my point
And please note, I will be deleting all further comments of this sort
Every time I criticise Amazon on twitter, I get deluged in persons signing themselves “AmazonPR”………….telling me I am wrong about conditions in their distribution facilities…..(bearing in mind that I actually worked in one for a while) and that their pay is much higher, conditions are so good that people regard them as hotels and 600 ambulances have never visited them in a 3-year period.
Their pay is rubbish.
Conditions are rubbish.
In most of them, staff are forbidden to park in the grounds (some actually park near and live in the cars for the week)
Hope they’re prepared for brexit…..a lot of their staff are from the EU working for agencies!!
Many businesses get special treatment from State legislation, tax policy, sweeteners and all the rest. Limited liability for example. They get an educated work force, a health service, infrastructure. All of these benefits are provided free to corporations largely to the detriment of the ordinary citizen whose tax burden has increased at the same time as the corporate tax burden has decreased, while their employment protections have been eviscerated by successive right wing governments, their wages have stagnated for decades and their pension rights diminished.
The corporate oligarchy and many politicians think that’s fine. I don’t. The least we can expect in return is that corporations are absolutely transparent in how they account for their profits/losses and the tax they do or do not pay and that these accounts provide the kind of information that enable us easily to detect what strategies they have used to limit their tax liability in any jurisdiction.
Thanks
Nice to see some sanity on here
As an example of special treatment Graham I had my flabber gasted by an article that revealed the unequal treatment of hospitals. The NHS have to pay business rates, private hospitals can avoid them. By declaring themselves ‘charities’ private hospitals can obtain 80% tax relief, the NHS is barred from such actions by government dictat. The private hospitals justify this on the basis that they provide ‘public benefit’ through ‘advancing health or the saving of lives’. They do not need to operate on a non-profit model. This begs the question what do the government think NHS hospitals do?
https://fullfact.org/health/nhs-and-private-hospitals-who-pays-business-rates/
Indeed.
You might even say that ordinary tax payers are subsidising these corporations’ tax breaks.
They use services and infrastructures without contributing much, if anything, to their maintenance.
And if anyone raises the argument that they provide employment: have you seen reports on Amazon working conditions at shop floor level? Employees’ rights are regularly trashed.
The sooner they’re made to properly start respecting workers’ rights and tax laws of the countries they settle in, the better. They must be made to.
And as far as I’m concerned, anyone defending these corporations has an 19th century view of society. They need to keep up.
What astonishingly vicious trolls you’ve been getting on what I thought were fairly innocuous articles about Amazon and some boring old accountancy thing. Now, I know nothing about taxes or accounting, so I would not comment on the actual substance (though I have just read a tweet from someone saying that Amazon have paid 0% tax in the US in 2018, and got a tax thingy back from the US government for a fair few dollars. Interesting, though I’ve forgotten the detail already as you see, and I can’t quite figure out how you get tax relief on no tax,,,).
But why would normal people come onto your blog and defend Amazon, and also throw in some personal insults? Seems unlikely (though of course possible, it’s still a bit weird). So shall we conclude that Amazon is in fact paying for the service and has a whole team trolling the Internet to do the troll thing at any kind of Amazon-bad-press? No wonder their profits are so low and they don’t need to pay tax, that must cost a fortune. Makes me suspicious they may have something to hide though,,,
As a simple shopkeeper and sole trader, I have to, each year, provide my income and expenses, and declare any other earning, either in the UK or abroad.
It is strange that any other company might not be required to do this.
And yet, some people appear to be outraged that you suggest that they should.
Am I missing something, or just being simplistic?
As far as I know from speaking to others, there is only one reason why people use Amazon – including myself – and that is because they make things affordable at a time when wages have been dropping or have still not returned to pre-2008 levels in terms of growth.
I would much rather buy my books from my local bookshop at full price knowing that I am contributing to my local area. But it has been very hard since 2010 to be honest to not go around looking for cheaper means to obtain books and good for myself and my family (I have two kids in school). By 2020 I would have lost an equivalent to a whole tear’s take home pay (after tax) due to austerity. That loss is also the local economy’s loss, the Governments loss etc., as well as my family’s.
My family tries to balance this by purchasing our food from local suppliers (veg boxes and also places where you take your own containers to fill up on foodstuffs and detergents) and such like.
There is a link between available income and why and where we shop. If the fall in income continues, it just helps the likes of Amazon to be honest to become more powerful and indispensable. There is something very unsatisfactory about this – relying on cheaper goods from places like Amazon that treat their staff like shite (and push others out of business who pay their taxes) but also talk about ‘economic freedom’ and other bullshit.
The economy needs more money and should compete on excellence and customer service – not just price – which always favours the big boys and thus makes the concept of choice – the supposedly Neo-lib holy grail – a joke.