Amazon, the largest online retailer in the UK, last year posted sales of more than $5.2 billion in that country, but didn't pay any corporation tax on the profits, which prompted an investigation by Britain's tax authorities.
Regulatory filings by Amazon US with the SEC show a tax inquiry into the company's operation in the UK, where it sells about one in four books purchased, and focuses on a period when the British business was transferred to a company in Luxembourg. The SEC filings show that Amazon UK pulled in about $11 billion in sales over the past three years, without paying any corporate tax on the profits. Amazon's tax affairs are presently being investigated in the US, China, Germany, France, Japan and Luxembourg.
Amazon launched in the UK in 1998, and remains that country's most popular retail website, garnering more visitors than Argos, Next and Tesco, and was recently awarded for offering the best customer service in Britain. But Amazon.co.uk is technically not a British-owned company - in 2006, ownership went to Amazon EU Sarl in Luxembourg, and was classified as an "order fulfillment" company - all payments go to Luxembourg, and the UK operation is plainly a delivery service. In 2010, the Luxembourg office employed 134 workers with about $10 billion in turnover, compared to 2,256 employees in Britain, with $233 million in turnover.
According to the SEC filings, the Amazon taxable profit margin in the UK over the past three years falls between roughly $420 million and $570 million, which would accrue a UK corporation tax of up to $160 million. Still, between 2003 and 2011, Amazon UK has only registered a cumulative net tax bill of just $4.75 million, of which $3 million was incurred in 2011.
Amazon's statement on the matter was this, "Amazon EU serves tens of millions of customers and sellers throughout Europe from multiple consumer websites in a number of languages, dispatching products to all 27 countries in the EU. We have a single European headquarters in Luxembourg with hundreds of employees to manage this complex operation."
It's clear that Amazon established operations in Luxembourg to avoid certain taxation, and admitted in their most recent SEC filing, "The effective tax rate in 2011, 2010, and 2009 was lower than the 35% US federal statutory rate primarily due to earnings of our subsidiaries outside of the US in jurisdictions where our effective tax rate is lower than in the US. Such earnings primarily relate to our European operations, which are headquartered in Luxembourg."
As mentioned, Amazon is also under fire in the US, for not collecting any sales taxes on products sold in states where it does not have an office. It is speculated that Amazon only pays taxes in five states, and other states have tried to force changes.