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Amazon’s tax avoidance could have cost the UK economy around half a billion pounds in 2021

Ethical Consumer has calculated that, in 2021, up to half a billion pounds could have been lost to the UK exchequer from the corporation tax avoidance of just one company, Amazon.

We explore how this has happened, and what the money could have funded instead.

Is Amazon obscuring its tax practices?

Estimating the total amount of tax that Amazon should have paid is difficult because it is not very transparent about its finances - only disclosing the minimum required by law in each country it trades in.

However our figures reveal an expected range of between £228m and £634m due in 2021. According to the most recent figures, because of its aggressive tax avoidance strategies, Amazon is likely to pay around £22m - just 4.2% of the £500m that might be expected.

Amazon has recently been making a lot of noise about how much it raises in other taxes like VAT and National Insurance for the UK economy. This is misleading because what is really happening is that it is replacing other shops (remember the high street?) which not only would be paying these taxes, but some corporation tax on their profits as well.

Because of this, Amazon is helping to build an economy where not everyone contributes to vital public services, instead creating excess profits for the laughable vanity projects of its billionaire owner in a time of crisis (such as space rocket rides for celebrities).

We conclude that the range is large (between £228m and £634m), because of the lack of publicly available data. It is, however, many orders of magnitude larger than estimates of actual corporation tax paid by the company which range from £15.4m to £22m.

In Amazon's communications, it makes much of how its losses are partly attributable to its huge capital investments in technology and infrastructure such as warehouses. Three questions however remain unanswered:

  1. Although this may be true, whilst the bulk of its UK sales continue to be routed through its Luxembourg subsidiaries, it does seem like something fishy is up. Why not just declare all UK sales in the UK and make these same investments?
  2. If its UK (and other international) businesses are so unprofitable, leading to minimal corporation tax being paid everywhere, why would any company want to invest so much capital in such an unprofitable business?
  3. If its claims are all true, why not publish full country-by-country reporting of its sales, capital investments and tax paid? There are now some excellent organisations to help with this including the GRI and a new international gold standard at the Fair Tax Foundation.

It is pleasing to see that a group of ethical investors have tabled a motion at Amazon's 2022 AGM on May 25th to make much better tax disclosures using such frameworks.

Cartoon drawing of workers in Amazon warehouse

What could half a billion (£500,000,000) pay for in the UK?

The tax avoidance of Amazon in one year could represent for example, either:

  • a £500 payment to the poorest one million UK households to help with rising fuel bills, or
  • raising the much criticised 'up to' 3% proposed pay rises for health service staff in 2022 by an additional 1%, or
  • a £10,000 investment in insulating the homes of 50,000 pensioners in the worst fuel poverty, which could also reduce UK CO2 emissions by around 100,000 tonnes

What can be done for things to change?

For a number of years Ethical Consumer has been calling for:

  • UK consumers to boycott Amazon until it pays proper levels of corporation tax in the UK, like many of the other businesses it competes with. (See our How to Avoid Amazon guides);
  • Amazon to recognise that now it is one of the 20th biggest businesses in the UK, it is time to support the economies it trades in, instead of being parasitic upon them;
  • For the UK government to raise the Digital Services Tax to 10% until the aggressive avoidance strategies of corporation tax by global tech companies of all kinds comes to an end.

For more information on how we estimated Amazon's tax avoidance click for the pdf.