First Amazon; now Apple, Google in the tax avoiding spotlight

First Amazon; now Apple, Google in the tax avoiding spotlight

Summary: With Amazon exporting its sales operations outside the UK to avoid paying hefty corporation taxes, both Apple and Google have suffered similar accusations.

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Apple and Google are next in line to take a beating from the UK taxpayer, only a week after it was discovered that Amazon avoids paying a hefty corporation tax bill in the UK by shipping its sales operations to Luxembourg.

Despite Apple's UK operations pegging around £6 billion ($9.5bn) in earnings, the company only paid a meagre £10 million ($15.9m) in tax to the Treasury's kitty.

The trouble is, the UK is broke, and frankly, we need the cash. Please.

In a nutshell, at least in the eyes of the UK government, Amazon is merely a "order fulfilment" and delivery company as its sales operations is based in Luxembourg --- and also a haven for tax ex-pats. Despite only having 134 people working at the Luxembourg headquarters, it reported a 2010 turnover of €7.5 billion ($10.2bn), compared to the UK's turnover of £147 million ($232m).

You can probably see why so many Britons are shaking their fist angrily into the air. For what they do in the UK, they only paid a fraction of the tax they seemingly should have done.

It was only a matter of time before other major names were next, such as Apple, as in similar fashion it outsources vast amounts of its European company outside of the UK to neighbouring Ireland, and only paid a tiny fraction of what it earned back into the UK tax wallet.

But as previously said, until the UK tax authorities say otherwise, the practice is legal in the UK. And while consumers and businesses struggle in the face of austerity and penny-scrimping, major companies are rolling in it and keep getting richer.

Again --- cheers for that, Gordon.

But if the UK thought it was alone, it isn't. As ZDNet's David Gewirtz explained, the U.S. wants a piece of Apple's pie, but the Cupertino-based company keeps about two-thirds of its vast $100 billion cash pile out of the U.S. government's reach.

Google has also been accused of avoiding paying tax by the Daily Mail. But the search giant claims it complies fully with UK law in a statement to sister-site CNET, and that it has "an obligation to our shareholders to set up a tax-efficient structure".

It's small talk for, "we spread our cash around," but if you could, you would. Seeing as I pay around 20 percent tax on my income every year, it's only fair the major companies play ball, too.

What's next? Apple and Amazon aren't breaking the law, and despite opposition from the taxpayer, shaking their fists at the box-packing giant and the shiny rectangle maker, there's close to nothing the government can do about it, except force legislation down Parliament's necks and run the risk of pushing away the technology bigwigs away from the UK.

The Conservative-led coalition government could always crack down on the tax laws so the Treasury reaps the rewards from Silicon Valley's giants operating in the country. But considering that it recently lowered the amount the richest UK citizens pay from 50 percent to 45 percent, thus squeezing the middle-classes even more to accommodate for the leg-stretching of the uber-rich, linen-wearing lefties have been more than sceptical.

Until the UK government does something about the tax-evading problem, Amazon, Apple, and Google will continue to maintain their tax avoidance system. Don't blame them, though. Blame the government for setting up a silly tax system that allows others to exploit the gaps so thoroughly.

But it's only the vast majority of the UK taxpayers suffering, so "not to worry".

Image credit: Simon Wicks/Flickr.

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Topics: Apple, Amazon, Banking, Government, Government US

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6 comments
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  • Easy answer to this

    Make it so that if companies try this bullplop, their products are automatically banned from being imported to the country in question.... THAT (hitting these companies in the pocketbooks and allowing companies who do right by their home countries) will get these companies to change their ways.
    Lerianis10
    • They should be penalised for obeying the law?

      Britain entered the EU knowing the free trade requirements.

      You design a tax system that encourages a certain outcome, then whine when that outcome is realised.

      Same applies to the US tax system. The system penalises overseas profited returned to the USA, so multinationals keep the money away. Now they want a go at this money as well.

      The Left's appetite for other people's money is insatiable. When taxpayers are bleed dry they borrow (bleeding taxpayers yet unborn) or print it (stealing savings through inflation).

      Companies will move all their operations overseas and the Left will be wondering what happened. The welfare dependent masses screaming as they're in some EU countries already.

      Oh and Zack; the uber rich never paid taxes. They didn't pay your 50%, nor will they 45%. Such tax rates simply discourage effort.
      Richard Flude
  • More details, please

    How exactly does this tax avoidance work? Does Amazon collect VAT tax in UK or are internet sale VAT-free?

    I do not know how that works in UK but problem for US is the double taxation. US companies have to pay US taxes on top of taxes already paid abroad. The corporate tax rate which is highest in the developed world does not help that either. We like to talk about corporate greed but in this case we may have a case of government greed.
    paul2011
    • Corporate Tax, not VAT

      They must (and presumably do) pay the VAT returns to the UK treasury, because the transactions are UK based. But the holding company is in tax haven in the middle of Europe (Germany, France etc. also "suffer" from this).

      They pay their corporate tax in Luxembourg, which is very cheap, compared to the UK. Becuase they aren't based in the UK, they only have a fulfillment centre there, they are only liable for corporate taxes on profits made by that centre (bugger all), the real profits come through the Euro HQ in the tax haven.
      wright_is
  • The problem is absurd taxes. Gid rid of corporate and personal income taxes

    and replace it with a reasonable 10% sales tax. Done. Government shouldnt be taking any more than that. It's not their job to wipe everybodys hind end from the time they're born til the time they die. Cut the bloat, waste, and corruption out of government and 10% will be more than sufficient.
    Johnny Vegas
    • 10% sales tax...

      The governments of the world are trillions in debt as it is, and you want to take away a majority of the income they already have? How is that going to help? :-S
      wright_is