Amazon grants almost match tax bill

In accounts published on Wednesday, Amazon.co.uk, which runs the warehouses used to deliver goods in Britain, reported pre-tax profits of £10.9m on £320m of turnover

Story highlights

  • Amazon.co.uk, which reported a tax charge of £3.2m for 2012, received £2.5m in grants during the year
  • Amazon's tax payments in Britain are low compared to its sales because the company earns its profits in Luxembourg
  • Amazon's surge in UK sales comes as many bricks and mortar retailers are struggling to compete

Amazon received nearly as much in government grants as it paid in UK tax in 2012, according to new figures likely to stoke the tax controversy surrounding the online retailer which made sales to British customers of £4.26bn in 2012.

Margaret Hodge, chair of the Public Accounts Committee which is set to grill Google on its tax affairs on Thursday, said the tax payment was "just a joke".

Amazon.co.uk, which reported a tax charge of £3.2m for 2012, received £2.5m in grants during the year.

Amazon's tax payments in Britain are low compared to its sales because the company earns its profits in Luxembourg. In 2012 it employed an average of 4,191 people in Britain, compared with 380 in Luxembourg.

In accounts published on Wednesday, Amazon.co.uk, which runs the warehouses used to deliver goods in Britain, reported pre-tax profits of £10.9m on £320m of turnover, representing services it provides to other group companies.

Amazon said: "Amazon pays all applicable taxes in every jurisdiction that it operates within. Like many companies, Amazon has received assistance in relation to major investments in the UK."

In 2011 Scottish Enterprise announced it was giving Amazon £2.5m in grants to expand its warehouse operations in Dunfermline and Gourock, creating 950 jobs.

    The development came as David Cameron promised to do more to tackle tax avoidance on British turf. The prime minister said "a lot of progress" had been made toughening up systems in crown dependencies and overseas territories, but he insisted that the process "could go further".

    The comments came after the IF coalition of leading charities warned that the UK had to get its "own house in order" before the G8 summit in Northern Ireland next month. Aggressive avoidance and evasion are an important element of the imminent diplomatic talks.

    Amazon's surge in UK sales comes as many bricks and mortar retailers are struggling to compete with international online retailers, with access to lighter tax regimes and unburdened by physical stores. This year has seen HMV, Jessops and Blockbuster collapse into administration as they battled online competitors.

    Last week, Justin King, chief executive of J Sainsbury, and a former business adviser to prime minister David Cameron, called on the government to address anomalies in the tax system, as international online retailers benefited from cuts in corporation tax, while high street retailers remained burdened by business rates.

    Amazon EU Sarl, the Luxembourg company that owns the company's inventory, processes payments and earns profits on sales across Europe does not disclose the profits it earns in the UK. But Amazon told the Public Accounts Committee last year that it made pre-tax profits of £74m on UK sales of £3.4bn in 2011.

    The French tax authority has issued a bill demanding an additional €196m for 2006-10, which Amazon intends to "vigorously contest". In its US tax filing, it said "we are or may be" under examination in the UK for 2003 onwards.