Select committee angered at “pretend ignorance”, as Amazon claims it is not based in the UK
Amazon has been hauled before a UK government Public Accounts select committee, accused of misleading customers over the origin of the company’s operations, and being “evasive” over its UK business profits.
Three US companies, Amazon, Google and Starbucks were grilled over the payment of corporation tax. Amazon Director for Public Policy, Andrew Cecil, was taken to task by a committee led by Margaret Hodge MP over the company’s European operations. He insisted that the company is working as a “pan-European business”, despite protestations from the committee that the core business of the UK company is domestically based.
The online retail giant, which is expanding its physical presence in the UK, generated £3.3 billion last year, but paid almost no corporation tax on the resultant profits. The company manages to avoid paying full corporation tax by reporting the reporting European sales through a unit in Luxembourg, where it can pay a tax rate of 11 percent on foreign profits.
“I believe I am dealing with a UK company,” the committee chair Hodge said, asking “When did any book that I purchase ever get to Luxembourg?”
Despite claims that Amazon pays 0.2 percent corporation tax, Cecil said that the company does pay tax in the UK. “We do…the accounts are publicly filed,” he said.
However he was accused of concealing the proportion of €9.1 billion European sales in 2011 which were derived from the UK.
A failure to disclose how much business was conducted in the UK was labelled “ridiculous” and “evasive” by the committee.
He insisted that the company is working as a “pan-European business”, despite protestations from the committee that the core business of the UK company is domestically based. Amazon employs around 30 times more staff in the UK compared to its Luxembourg base.
In a heated exchange, Amazon was also accused by Hodge of being uncompetitive to rival local sellers, of using UK infrastructure without giving back, and paying low level wages.
Another committee member said the company’s position meant that it was “killing” competitors, citing the recent bankruptcy of high street retailer Comet.
Amazon has recently invested in the UK, with the creation of 2,000 jobs, but has come under fire for its evasion of tax here. David Cameron recently said he was “delighted” at Amazon’s increased presence in the UK, claiming the company’s investment would be beneficial for the UK economy.
“This is great news, not only for those individuals who will find work, but for the UK economy,” the Prime Minister said. “This shows that the UK has the infrastructure and talent to continue to attract major investments from leading companies such as Amazon.”
The committee also delivered some tough questioning over their tax payments. Starbucks was accused of specifically designing its company structure in order to make tax avoidance easier.
Starbucks Global CFO, Troy Alstead, claimed that it had seen losses in all but one of the 14 years that it has operated in the UK. Despite only “one year of profitability”, in 2006, the head of UK operations was given a promotion to the firm’s worldwide business.
However the select committee chair said that “doesn’t ring true”, adding that they are “sceptical” of Starbucks’ story, manipulating money to tax havens, with a regional base in Amsterdam.
Meanwhile Google’s corporate structure, with taxes paid in Ireland, was labelled “the most difficult” of the three.