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Originally Posted by HarryT
I'm honestly baffled by what it is you're complaining about. Amazon made a loss in 2012, and an exceedingly small profit in 2011. Tax is paid on profit, not sales. What is it you're accusing them of not paying, exactly?
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But the very definition of 'profit' is itself fiddled.
Amazon have reduced their taxable profit by transferring operations from the US and UK to Luxembourg, which has a much more generous definition of what charges can be applied to reduce profits.
The US and UK companies are deliberately run at low to none profit margins so as to reduce the amount of tax paid. So all of the IP has been transferred to Luxembourg, and the other companies pay very large amounts in licensing fees, reducing their taxable profit.
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The practical effect of this change of ownership, notified to shareholders in the 2007 accounts, was to reduce the UK business to little more than a delivery service. From 2006, sales made in Britain were billed from Luxembourg and any profits from those sales were taxed not in Britain but in Luxembourg. To emphasise the impact of this, the accounts for Amazon EU Sarl show it employed 134 people in 2010 and generated turnover of € 7.5bn. Amazon.co.uk, employing 2,265 people, turned over only £147m in the same year.
Amazon EU Sarl's total sales have reached €23bn and turnover in 2010, the last year for which published accounts are available in Luxembourg, was €7.5bn. Despite this dramatic growth, Amazon EU has not enjoyed enormous profitability. But given that the creation of Amazon EU appears to have been designed to bring down the tax rate applied to the Amazon group profits, this is perhaps not surprising.
At first glance, the corporation tax rates in Luxembourg and the UK are similar, but the Luxembourg authorities have a different view of costs that can be offset against income, which reduces taxable profit. So Amazon EU Sarl's €7.5bn of income in 2010 was almost entirely offset by €7.4bn of charges, enabling it to disclose a tax charge of just €5.5m. The charges are defined by the company as the "cost of product sales and other ongoing costs related to the operations of the company".
Amazon EU Sarl has reported profits of just €55m on its €23bn sales, on which it has declared net tax of only €15m. This low profitability has not stopped Amazon EU growing to become a business of considerable substance. Net assets were almost €4bn at the end of 2010 - , about four times the 2006 value. The company has amassed more than €2bn in cash and high quality investments and has been the vehicle which has financed several group acquisitions. It financed the purchase of LoveFilm; is a 50% investor in Joyo, a Chinese online retail joint venture; and bought 100% of Joyo.com, a British Virgin Islands company, for €105m in 2010.
This is in stark contrast to the performance of the UK fulfilment business which filed its 2011 accounts last month. For the first time since 2006, Amazon.co.uk Limited posted an after-tax profit of £1.2m, much better than the £3m after-tax loss reported a year earlier. The accounts show its turnover was £208m, a big improvement on the £147m recorded in 2010 but dwarfed by the £3.3bn of UK sales passed to Luxembourg.
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