Amazon is opening a new U.K. office in the heart of central London that could pave the way to new hires in the region, as the retail giant seeks to expand its European operations.
It comes amid ongoing controversy as the U.K.-based company faces questions over its complicated tax avoidance schemes in the European Union by the country's politicians.
There's some obligatory press release stuff, but read on because it gets interesting. Trust me.
The new 12-story building will accommodate around 1,600 staff in the 210,000 square-foot office in Holborn, the south-west corner of the East London Tech City. The building will be developed and renovated, and is due to be completed by September. Many existing staff from Slough, Berkshire, will move to the office upon opening.
According to the press release, Amazon has over 6,000 permanent employees in the U.K. (The firm has another 10,000 or so contract and temporary holiday staff.) The company's U.K. managing director Christopher North said: "We will continue to create thousands of jobs in the coming years across the U.K."
That's the interesting bit. Right there. See it?
North hints that Amazon's U.K. operations will expand in employee count, but it's exactly that office that is accused by U.K. lawmakers of paying "no tax" on their operations in the country, at least according to one politician.
Because Amazon's U.K. sales flow through Luxembourg where the tax rate is significantly lower than the 25 percent tax rate in the U.K., the retail giant's British subsidiary doesn't have to pay tax on that figure. It only pays tax on its U.K.-based operations, which is in fact an "order fulfilment" service.
That, to you and I, is a man-in-a-van delivery service. As you might expect, it's almost nothing in regards to tax.
The U.K. office has thousands more staff than the mere couple of hundreds in the Luxembourg-based sales office, and yet Amazon paid just 0.4 percent in corporation tax for 2011, according to The Guardian's figures.
Margaret Hodge MP told Amazon's U.K. representative Andrew Cecil in session late last year: "Your entire activity is here yet you pay no tax here and that really riles us," reported the Associated Press in November.
You see where this is going?
Amazon may be adding more staff to its U.K. office that pays almost no tax. But this gets even more laughable when more politicians get dragged into the fray by fawning over the firm with flattery and affection while shaking hands and applauding the move.
London mayor Boris Johnson said he was "delighted" that Amazon was choosing the country's capital and continued to "support this vibrant sector," before he waffled on for a few more lines singing London's praises as one might expect as the capital's elected ambassador.
Not a mention of taxes, though. Not a hint, or a whiff. Some might say he "avoided" the issue entirely.
Which is funny, considering his contractory remarks regarding other firms that have suffered a similar public backlash to such tax avoiding claims.
Johnson took the high ground by calling out Google directly following the search giant's own tax records came under scrutiny by the U.K. Parliament, claiming multinational firms should "show a greater commitment to society" by paying more tax. Google U.K. boss Matt Britten fired back on all cylinders by criticizing the Conservative London mayor for failing to support tech companies in the capital.
Yet when it was Starbucks' turn to face the heat, Johnson said that people should not "sneer" at the coffee maker after it decided — as if it was an option in the first place — to pay £20 million ($30.4m) in U.K. corporation tax, after it was found to have paid no tax in the U.K. over the course of many years.
What Johnson may not have known is exactly what the U.K. office does, how it works, or what the staff do there. That said, more than 100,000 people signed a petition calling on the online retailer to "pay their fair share of tax in the U.K."
(That figure would have been enough to spark a debate in the U.K. House of Commons, had it have actually been on the U.K. government's official petitioning website and not Change.org.)
Meanwhile in the U.S., Amazon is also facing a federal government tax bill of around $234 million. The online retailer contests the unpaid bill, claiming that the Internal Revenue Service (IRS) overestimated the value of its "intangible" items, such as intellectual property, software, and trademarks. If the court rules against Amazon, it could have a massive knock-on effect to other major technology companies in the U.S.
Amazon may have a friend in the London mayor, but certainly not in the U.K. Parliament and the U.S. government. And the way it's going, it may not have many allies in the technology industry left if it rains on their respective parades.