Bezos’ Life of Luxembourg: Amazon shifts up to £8.2bn from the UK to the European Microstate

August 24, 2021

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What's going on here?

A report commissioned by Unite found that Amazon reported up to £8.2bn of its sales made in the UK in Luxembourg.

What does this mean?

An analysis of Amazon’s public accounts revealed that while their US accounts showed £13.7bn in sales in the UK, Amazon’s branches in the UK reported only £5.5bn of sales. While the discrepancy in reporting appears suspicious, Amazon has deliberately created a complex, but legal, corporate structure to avoid taxes. When a customer buys something from Amazon UK, they are billed by the UK branch of Amazon EU Sarl, which is headquartered in Luxembourg, a tax haven with a very low corporate taxation rate of 15%. Amazon shifts all of its European revenue here, making the headquarters 36 times more productive than the UK branches. While many Big Tech companies (such as Facebook, Microsoft, Alphabet and Apple) are guilty of creating tax evasion structures, Amazon continues to be the worst offender. 

This news comes in the wake of the G7 summit, where a global minimum tax of 15% was agreed upon to counter tax avoidance by multinational companies. The UK, however, seemed lukewarm about the prospect of raising taxes, despite the fact that Amazon had paid £46m less in taxes than expected to the UK.

What's the big picture effect?

The pandemic has accelerated the monumental growth of Big Tech companies, with Amazon in particular reporting over £100bn of global sales in just three months. Amazon, however, is not required to publicly disclose where sales were actually made, which allows it to legally shift profits to tax havens. Indirect taxes are ultimately borne by workers in the form of lower wages, and Amazon’s history of crushing unions (David Streitfeld, NYT) shows how taxes are yet another way of exploiting workers with no accountability. By enacting lax rules that allow Big Tech companies to shift profits around as they please, governments are effectively subsidizing the creation of a monopoly that harms the market. 

Despite it being a record-breaking year for Amazon, the company paid no corporation tax in Luxembourg for 2020, and actually reported a loss of £1.2bn, and received corporate tax credits to offset future tax bills. While Amazon has paid taxes in Luxembourg before, European regulators have claimed that it is almost 250 million euros less than it should have. However, when Luxembourg appealed this claim, the EU General Court found that Luxembourg had not awarded any specific advantage to Amazon that allowed it to pay less taxes, despite the country’s prime minister having personally offered to help the company through a confidential tax agreement in 2003. Due to vague rules, the current international tax system has become so misaligned that even obvious payment discrepancies are ruled as legal. 

Reform appears to be on its way, with the introduction of the global minimum of 15% corporate tax rate introduced at the G7 summit. Further reforms required that 20% of the profits of the 100 biggest firms (including Big Tech) will be reallocated to countries where sales have actually taken place and taxed there. While a global minimum tax is a welcome development, critics have argued that 15% is far too low to raise more money from Big Tech companies and end the race to the bottom on corporate tax. It is too similar to the soft rates charged by tax havens, thus benefiting rich countries and increasing inequalities in the post-Covid world. Further, since the move only applies to multinationals with a profit exceeding a 10% margin, Amazon may be able to escape it as it runs on very low profit margins. More such reforms are expected at the upcoming G20 summit, with calls coming especially from developing countries who are the hardest hit by tax avoidance.

Report written by Roshni Suresh Babu

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