21st August 2017
Jeff Bezos, owner of Amazon and all-round transformational man (pictured right), was named the richest person on the planet for a brief moment earlier this month. However, he remains a controversial figure. When he’s not sparring with Donald Trump, or fending off criticism of the firm’s workplace model, he’s usually hitting the headlines for Amazon’s tax avoidance woes. And, according to the latest reports, the firm has paid even less then it was widely criticised for a few years ago. But how does the firm justify this behaviour and how has it evaded prosecution for so long?
Amazon tax avoidance
Amazon has hit the headlines over the past few years for paying an incredibly low rate of tax. Despite reporting turnover of £946m in 2014, it paid just £15.8m in tax. And that figure dropped even further in 2015 to £7.4m despite turnover increasing to £1.46bn.
Amazon explains the fall as a drop in profits from £48.5m to £24.3m and that expenses also rose by 60% to £1.4bn, with share based payments accounting for £36.7m. This meant that profits fell along with taxes. A spokesperson said, “Corporation tax is based on profits, not revenues, and our profits have remained low, given retail is a highly competitive, low-margin business and our continued heavy investment.”
However, despite its protestations, many commentators have accused Amazon of being involved in tax avoidance and claim it is yet another instance of giant, multinational firms exploiting loopholes in the UK’s tax system to avoid paying more money.
Director of Global Justice Now, Nick Dearden, commented on the Amazon tax avoidance scandal. “There’s no legitimacy in the government saying that it can’t afford to grant minimal pay rises for nurses and other vital occupations in the public sector when it is allowing massively profitable corporations like Amazon to walk away with other desultory tax bills.”
This is taking place at a time when increased pressure was supposed to be placed on Amazon’s tax model. Even Donald Trump warned the firm prior to his election victory, saying “If I become President, oh do they (Amazon) have problems. They’re going to have such problems.” Unfortunately, the types of problems weren’t specified, however Mr Trump’s promise seems to have fallen through.
Despite this warning the firm has continued to exploit loopholes that many critics feel should be closed. While the situation for large firms like Amazon remains unclear, for other organisations the net is certainly closing in. Defences against any form of evasion or avoidance strategies are getting tighter, and unless you have the resources and legal backing of a company like Amazon, it’s advisable to steer clear of murky schemes that could ultimately land you in trouble. In recent months we’ve seen numerous footballers including Lionel Messi and Cristiano Ronaldo being prosecuted for backdated law changes in Spain and firms that utilise these loopholes could potentially find themselves in a similar situation in the near future if this happens in the UK.
Amazon is an anomaly and it’s not worth even trying to replicate the firm’s model. If you want to ensure you remain on the right side of the law, and don’t want to impact your firm’s public image, then it’s worth partnering with a specialist before it’s too late. Jeff Bezos might be able to handle any fine that comes his way, chances are that your organisation won’t have the same resources.