Amazon’s main UK division, Amazon UK Services, has once again avoided paying corporation tax for the second year in a row. The company received a tax credit of £7.7 million for investing in infrastructure, including robotic equipment at its warehouses. This tax credit was possible due to the government’s “super-deduction” scheme introduced by Rishi Sunak, which allows businesses to offset a portion of their investment spending against profits. While Amazon’s main division paid no corporation tax, other parts of the company’s UK business did pay an undisclosed amount. This news has prompted criticism from tax justice campaigners and shareholders who are calling for more transparency.
£7.7 Million Tax Credit
Amazon UK Services, which employs more than half of Amazon’s UK workers, received a tax credit of £7.7 million in the year ending December. This tax credit was related to the £1.6 billion invested in infrastructure, which includes robotic equipment at its warehouses. The tax credit was made possible by the government’s “super-deduction” scheme, which allows businesses to offset 130% of their investment spending against profits. In 2021, Amazon booked a credit of £1.13 million under this scheme.
While the tax credits reduced Amazon’s tax liability, the company’s pretax profits at the main division still rose by 9% to almost £222 million in 2022. Sales also increased by nearly 8% to £6.56 billion. However, there are concerns about the lack of transparency regarding Amazon’s total profits in the UK and the amount of corporation tax paid. Tax justice campaigners and shareholders argue that Amazon’s market dominance and its ability to avoid taxes give the company an unfair advantage over local businesses that cannot employ such tactics.
Paul Monaghan, the CEO of the Fair Tax Foundation, criticized Amazon for not disclosing its total profits and the corporation tax paid in the UK. He argued that Amazon has grown its global market dominance by avoiding taxes, which allows the company to undercut responsible local businesses. Monaghan also raised concerns about the effectiveness of the super-deduction scheme, stating that it not only wiped out the corporation tax for the last two years but is likely to do so again in the future.
In response to these criticisms, an Amazon spokesperson stated that Amazon UK Services is just a small part of their business and that when looking at all their UK companies, they did pay corporation tax. The spokesperson also highlighted the significant capital investments made by Amazon in the UK as the reason for the reduced tax liability.
While Amazon’s tax benefits have been scrutinized, the company’s employee numbers in the UK have stalled at 75,000 in 2022. This is after a rapid increase from about 27,500 employees in 2018. The growth in employee numbers has slowed down due to reduced online spending after the reopening of high streets and the easing of pandemic restrictions. As a result, Amazon announced plans to shut down several warehouses and delivery sites, leading to job losses.
Despite the slowdown in employee numbers, Amazon invested £12 billion in the UK in 2021. This included £1.6 billion spent on infrastructure, such as more robotics for warehouses and a software development center in Swansea. The company’s sales across its entire UK network also increased by £1 billion, making it larger than Asda, the UK’s third-largest supermarket.
Amazon claims that it paid a total of £781 million in taxes in the UK, including business rates, employer’s national insurance contributions, and corporation tax. However, critics argue that this figure does not provide a clear picture of Amazon’s tax contributions, especially when considering the tax credits received in the UK and other European countries.
Conclusion
Amazon’s main UK division, Amazon UK Services, has once again avoided paying corporation tax, thanks to tax credits received for its investments in infrastructure. While the company’s pretax profits and sales have increased, there are concerns about the lack of transparency around its total profits and tax contributions. Critics argue that Amazon’s ability to avoid taxes gives the company an unfair advantage over local businesses. The controversy has highlighted the need for more transparency and fair taxation practices from multinational companies operating in the UK.