LONDON (Reuters) - Amazon.com Inc filed accounts on Friday showing a UK tax bill of 10 million pounds despite $7.3 billion sales in Britain, because the company reports most of its European profit in a tax-exempt Luxembourg partnership.
Amazon.co.uk Ltd reported a 56 percent rise in profit to 17 million pounds during 2013 on a 13 percent rise in UK revenues, which one academic said could mean the company came under pressure from the UK tax authority to change its tax arrangements.
Corporate tax avoidance has become a hot topic in Europe following revelations in the past couple of years about how companies like Apple and Google pay little tax in many of their main markets.
Amazon said it follows all the tax rules in every country where it operates. Apple and Google also say they pay all the tax they should. HMRC declined comment.
All Amazon customers in Europe contract directly with and pay Luxembourg based Amazon companies for the goods and services they buy. These companies reduce their taxable income by paying fees to a tax exempt partnership, also based in the Grand Duchy.
Amazon.co.uk is funded by its Luxembourg-based affiliates. The rates of such inter-company remuneration are usually agreed with the UK tax authority. In 2013, intercompany fees paid to Amazon.co.uk Ltd rose 40 percent to 449 million pounds.
The result was that Amazon’s current tax bill for 2013 was its biggest ever.
“It’s possible Amazon may have come under pressure from HMRC (the UK tax authority) to adjust their inter-company agreements,” Prem Sikka, Professor of Accounting at Essex University said.
The amount of money Amazon.com Inc reports through the tax-exempt partnership that sits atop its European corporate structure has dropped sharply in the past two years, after the U.S. tax authority tightened rules it felt were being abused to shift profits.
Reporting by Tom Bergin; Editing by Elaine Hardcastle