French Government Thinks Amazon Is Too Customer Friendly

[HarryT]

Originally Posted by MattW

You're damn right, I'm blaming Amazon (and all the other corporations). And rightly so -- the artificial distinction that you make between "the law" and the stupid EU on the one side and the poor corporations on the other side is pretty naive at best or outright disingenious at worst. I don't know which.

Do you personally pay more tax than the law requires you do? It seems that that's what you want Amazon to do.

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?

[Billi]

No, nobody would want Amazon to pay more than the law requires. "We" all would be more than happy if they would pay as much as the law requires. If a company founds a number of sub-companies with the only business to limit the tax burden then this is not covered by the law of France or Germany or whereever they do so.

[HarryT]

Originally Posted by Billi

No, nobody would want Amazon to pay more than the law requires. "We" all would be more than happy if they would pay as much as the law requires. If a company founds a number of sub-companies with the only business to limit the tax burden then this is not covered by the law of France or Germany or whereever they do so.

No; it's covered by EU law. Amazon sell ebooks from a company in Luxembourg because it makes them cheaper for their customers to pay 3% Luxembourg VAT rather than 20% UK VAT. Sure, that benefits Amazon by getting them more customers, but it also benefits us in the form of lower prices.

(EU law is changing in 2014 to prevent this, BTW.)

[murraypaul]

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?

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.

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.

[Billi]

That it benefits the customers in this special case is a side effect and not the reason for chosing Luxemburg and you know this damned well, Harry. I think it was pdurrant who once posted here a calculation about Amazon's business numbers and how much they would have to pay if they would pay taxes in the U.K. and how much tax they now pay in Luxemburg. And it is not only the difference that you lose in the U.K.

[murraypaul]

Originally Posted by HarryT

No; it's covered by EU law. Amazon sell ebooks from a company in Luxembourg because it makes them cheaper for their customers to pay 3% Luxembourg VAT rather than 20% UK VAT. Sure, that benefits Amazon by getting them more customers, but it also benefits us in the form of lower prices.

(EU law is changing in 2014 to prevent this, BTW.)

It is already against EU law. Luxembourg is not allowed to charge a 3% rate on eBooks, but are doing it anyway.
The EU law change is not to prevent charging 3%, but to make it so that VAT is charged at the rate of the consumer's country, not the base of operations.

[HarryT]

Originally Posted by Billi

That it benefits the customers in this special case is a side effect and not the reason for chosing Luxemburg and you know this damned well, Harry. I think it was pdurrant who once posted here a calculation about Amazon's business numbers and how much they would have to pay if they would pay taxes in the U.K. and how much tax they now pay in Luxemburg. And it is not only the difference that you lose in the U.K.

IF they are acting illegally, then I'm sure the European Commission will not be slow to prosecute them. If they're not acting illegally, but merely acting to minimize their taxes in accordance with the law, then I see absolutely no cause for criticism. That's what accountants are paid to do. In fact the company directors could be prosecuted for not doing so, given that they are legally required to act in the best interests of their shareholders. Paying more tax than you have to could very well be considered not to be in those best interests.

[Billi]

What's in the best interest of a company and what is in the best interest of "society" may be two very different things. If you rate Amazon's interests higher than those of the rest, okay, that's your good right.

[HarryT]

Originally Posted by Billi

What's in the best interest of a company and what is in the best interest of "society" may be two very different things. If you rate Amazon's interests higher than those of the rest, okay, that's your good right.

No, I certainly don't. But companies have no obligation to benefit society, whereas they do have a duty - a legal requirement, in fact - to maximize the benefit to their shareholders. (That's under UK law. As we've discussed before, I think things may be different in German law.)

[Billi]

Yes, they are different (although that may make no difference how our companies behave sometimes).
Maybe companies have no obligation to benefit society but they certainly do benefit from society. In the case of Amazon, as they are a "parcel company" they benefit for instance a lot from the transport infrastructure like roads and streets ... that are build and kept by taxes.

[mbovenka]

Originally Posted by Billi

Maybe companies have no obligation to benefit society but they certainly do benefit from society. In the case of Amazon, as they are a "parcel company" they benefit for instance a lot from the transport infrastructure like roads and streets ... that are build and kept by taxes.

And so we come full circle: which they pay, but no more than they are required to by law. Just as you and I do. I'm not paying any more taxes than I have to, and I'm assuming you aren't either. Why do you expect Amazon, or any company for that matter, to act different?

[HarryT]

Originally Posted by Billi

Yes, they are different (although that may make no difference how our companies behave sometimes).
Maybe companies have no obligation to benefit society but they certainly do benefit from society. In the case of Amazon, as they are a "parcel company" they benefit for instance a lot from the transport infrastructure like roads and streets ... that are build and kept by taxes.

It's a mutually-beneficial arrangement. Think of the amount of business that Amazon brings to the Post Office and other parcel delivery companies. Everybody wins.

[murraypaul]

Originally Posted by mbovenka

And so we come full circle: which they pay, but no more than they are required to by law. Just as you and I do. I'm not paying any more taxes than I have to, and I'm assuming you aren't either. Why do you expect Amazon, or any company for that matter, to act different?

What I've heard in this thread is:
a) Amazon are using tax loopholes to reduce the amount of tax they are legally required to pay
b) Something should be done to prevent those tax loopholes being possible

[murraypaul]

Originally Posted by HarryT

It's a mutually-beneficial arrangement. Think of the amount of business that Amazon brings to the Post Office and other parcel delivery companies. Everybody wins.

... by an awful lot less that if Amazon weren't able to (legally) divert all of their taxable profits to Luxembourg.

[John F]

Originally Posted by MattW

Your world-view is ridiculously clear-cut. First, despite what the US Supreme Court might want you to believe, corporations are not "people".

...

WTF??? Why are you dragging the U.S. into this? Can we move this thread to the "politics and Religion" section please.