A London-based corporate tax specialist has revealed that although big businesses might avoid paying UK corporation tax by basing their operations overseas, as highlighted by the media coverage afforded to Amazon recently, they invariably pay higher levels of other taxes.
Toby Ryland’s comments come after reports surfaced in the media that Amazon recorded sales of more than £7.6bn in the past three years, but it did not pay any corporation tax in the UK because ownership of the business belongs to a Luxembourg-based company.
The tax partner at Blick Rothenberg said: “What you might find is that a multinational pays less corporation tax because of the way it structures its affairs, but it might have substantially high payroll taxes and huge amounts of VAT so what you often find is that the total tax that is taken from the multinational is actually quite substantial.
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“They might minimise their corporation tax but still pay huge amounts of VAT so it’s difficult to look at just one element of taxation.”
In 2006, Amazon’s British operation was transferred to a company in Luxembourg, where tax rates are much lower. Subsequently, Amazon.co.uk is merely regarded as a delivery organisation and that payments for goods bought from the site go directly to Luxembourg.
Ryland went on to say that this sort of practice is perfectly legal and Amazon is not the first company and will not be the last to adopt a tax-saving business strategy.
He said: “It’s not really [a new thing], essentially any multinational is going to look at minimising the tax it pays just through citing activities in the lowest tax territories that they can. It’s a perfectly legal way of structuring things, and they won’t choose to put operations in a very high tax territory if they can locate it somewhere where they can pay less tax.”
Ryland went on to say that most multinationals will seek to minimise their overall tax rates in any country they operate, not just in the UK.
The Daily Telegraph reported that Amazon is facing an investigation by British tax authorities, but that HM Revenues & Customs had declined to comment on whether this was the case.