Amazon 'confidential' sales figures outed by U.K. parliament

Amazon 'confidential' sales figures outed by U.K. parliament

Summary: Days after a U.K. parliamentary committee accused Amazon U.K.'s representative of "hiding" company sales numbers, the same committee publishes the firm's confidential figures.

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Confidential Amazon documents revealing sales figures for the U.K. were published online by no less than the parliamentary committee charged with investigating the firm's tax arrangements. 

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Google, Amazon executives give evidence. (Screenshot: BBC News)

A fortnight ago, Amazon's director of public policy Andrew Cecil was dubbed "not a serious representative" for Amazon, after coming to give evidence, in the words of U.K. Public Accounts Committee chair Margaret Hodge MP, "with absolutely no information."

The hearing was also attended by representatives from Google U.K. and Starbucks U.K., which have both been accused of avoiding paying the full amount of tax on their sales over the past few years.

After providing little evidence on the retail giant's sales figures -- which would have allowed the Committee to have understood why the firm is paying so little tax, compared to the 24 percent corporation tax these firms should be paying -- the Committee requested additional written evidence to explain Amazon's tax and corporate structure, and how much the firm makes from its U.K. operations. 

Amazon eventually provided the written evidence to the scrutineers. But, despite a "respectful" request to keep the written evidence confidential and out of the public eye, the Committee published it anyway.

The figures

In his letter, Cecil reiterated his evidence that, "[Amazon] have never broken out revenue figures on a country or website basis," he noted that, "we disclose sales, operating expenses, operating income and information for our two business segments, 'North America' and 'International'."

But there's a first time for everything. The firm broke down "International" figures from European countries, except countries from which sales did not exceed $10 million.

(The company noted value-added tax (VAT), which in this case is redundant and not important. Cecil failed to explain the firm's corporation tax arrangement.)

  2009 2010 2011
Net sales (Amazon.co.uk) £1.86bn  £2.36bn  £2.91bn
U.K. VAT collected (Amazon EU Sarl) £172m  £262m  £216m 

Amazon generated £3.35 billion ($5.37bn) in U.K. sales before tax. The firm turned a profit of £74 million for 2011.

Out of that, £2.91 billion ($4.66bn) -- or 87 percent of the total U.K. sales figure -- was generated through Amazon.co.uk, while the remaining £441 million ($707m) was generated through other Amazon services and subsidiaries, such as LoveFilm, for instance. However, sales of e-books, music and other downloadable media, were sold and therefore taxed through the firm's Luxembourg-based subsidiary, Amazon Media EU Sarl. 

All in all, Amazon's sales increased by 27 percent from 2009 to 2010, and jumped a further 23 percent in 2011 on the previous year to £2.91bn ($4.66bn).

How Amazon works in the EU

The structure of these major multi-national companies is what has the Public Accounts Committee so interested. While some companies use the "Double Irish" arrangement or the "Dutch Sandwich" tax avoidance schemes, Amazon instead uses Luxembourg as its main European base base.

On the other hand: "Customer support services; accountancy, tax, legal, human resources, and localisation services; merchandising and marketing support services; and purchasing services. Amazon.co.uk Ltd is compensated for these services by Amazon EU Sarl; therefore it is not a 'branch' or 'place of business' of Amazon EU Sarl."

Amazon has three major divisions: intellectual property (IP) licensing, digital sales, and its Web sites. 

Here's what it looks like in a nutshell, complete with pretty pictures:

amazon-map

Amazon.com Europe Holding Technologies (based in Luxembourg) holds all the intellectual property to its EU and U.K. Web sites, but is in turn owned by Amazon.com Inc., Amazon International Sales, and Amazon Europe Holdings -- all of which are based out of the U.S.

This allows U.S.-based (headquartered) Amazon's technologies to be licensed appropriately throughout Europe by its subsidiaries. So, licensing fees for that intellectual property are paid to the U.S. head office by European firms -- around £151 million ($242m) for U.K. sales in 2011. 

All EU sales run through Luxembourg-based Amazon EU Sarl (where the tax rate is far lower; around 3 percent VAT compared to the U.K.'s current 20 percent rate), including Amazon.co.uk and other Amazon EU Web sites. 

While we already knew, it's worth noting again that the only U.K. branch of Amazon worldwide is Amazon.co.uk Ltd., which is an order fulfilment company. Sales go through Luxembourg, while the U.K. arm only "provides fulfilment and logistics services," said Cecil. It's worth noting that Amazon employs around 500 staff in Luxembourg, compared to the 15,000 or so employees in the U.K.

"Amazon.co.uk Ltd. earns a margin on its operating costs for providing services performed in the U.K. to group companies, primarily to Amazon EU Sarl."

Topics: United Kingdom, Amazon

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7 comments
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  • Next time give the committee the information it asked for!

    ;-)
    kd5auq
    • Er, they did

      The committee asked for more information and Amazon gave it to them. The committee then decided to publish it.
      Aerowind
      • I think they meant offer the info when asked first.

        Looks like they had to come back with far more information, and far more publicity, than some simple figures on the day. A case of being vague has backfired dramatically and we can all see the figures involved.

        And it's not like we can say we'll blacklist Amazon, or Google and not buy anything. Maybe Starbucks but that would take an effort. Lets just tax their revenue, and block reverse charging/licencing etc. Maybe the answer is simply to make the resident company get the same tax as all the others in the chain added together. That would make me think twice!
        johnmckay
  • time to reign in the big fish

    it would take a world wide effort to reign in these mega corporations that hide their revenue to avoid paying their dues/taxes.
    databaseben
  • It's legal, so..

    get over it. Oppressive, wasteful, and self serving governments should either change their laws so they can steal more money (err, I mean impose "fair" taxes) from companies, or shut up. If there are loopholes around their tax laws, then fix them, otherwise tough. There isn't a single one of these jealous greedy politicians that would 'give' you their personal money out of the goodness of their heart, but they don't don't hesitate to take yours and feel righteous for doing it. (And people just bend over and take it like mindless sheep.)

    (When did it become acceptable to punish success and reward failure?)
    Hemo2
    • It wouldn't take as much as folk make out.

      There's no real will to change things till now and whilst it is legal it can all be made history by multiple means. Countries could base taxes on Sales rather than phoney net margins for instance, or turnover. It would risk annoying some companies but lets face it... who really cares if they're not paying much in tax OR retaining huge numbers of jobs.

      The US can clearly be seen to be stripping OUR CASH back to the USA through embarrasingly obvious 'loopholes' where you can licence hot-air, and speech practically, and reverse charge it to an organisation. I'm sure everyone does it and we win some, lose some but it removes OUR choice. Hopefully some simple changes will still allow companies to do this LEGAL stuff but add some tax to the front end and make it a double tax. That might give them an incentive to adjust their legally due taxes.

      HEMO2: Nobody is punishing anyone. Can you read and do you understand that the taxes due on billions of pounds are being paid to another country. Your cash is helping another country for no obvious benefit to yours! Plus the taxes that could fund our kids futures, our pensions, etc... is going to the USA. Think about that first. Thank about how it affects YOU.
      johnmckay
  • Amazon got caught, it should pay up

    Most tax jurisdictions have a general law that says if a person (a company is considered to be a person) does something only to avoid tax then the tax department can disallow the action i.e. pretend it did not occur. In the the case of Amazon UK, it is pretty obvious that Amazon set up its complex corporate structure to move profit to Luxembourg where it would be taxed at a lower rate. UK government has every right to say, 'The massive profit of Amazon Luxembourg should have been booked at Amazon UK. We will pretend that is was and that is the tax you will pay to the UK.' This is similar to small businesses trying to do income splitting with children of the owner by hiring them to vaccum the home office for $50,000 per year. Both should be disallowed. Why? Everyone needs to pay their fair of taxes. Otherwise, a disproportionate level of taxes are paid by people who cannot pull these finagles.
    waltersokyrko@...