UK tax authorities launch probe against Amazon | WPN World People News

Britain's biggest online books retailer Amazon.co.uk is likely to face tax probe for possible tax evasion on the profits from estimated sales of 3.3 billion pounds last year and up to 10.3 billion pounds since 2009.

HM Revenue Customs (HMRC) has refused to confirm the probe which was reportedly triggered by a filing by parent company Amazon to regulators in the US.

Besides the UK, the company is currently facing tax evasion probe in six markets including the US, Luxembourg, China, Japan, Germany and France.

As in the UK, in other countries too Amazon seems to have used the fact that its shop exists online, leaving room for interpretation as to where its goods are actually sold, and therefore which tax rules apply.

Richard Murphy of the Tax Justice Network states that though the tax structures are legal, it is "blatantly a trick" used by multinational companies to evade paying tax.

In the US, Amazon is facing probe for sales tax avoidance on products sold in the 45 states where it has no warehouse or offices.

Amazon, which launched in the UK 14 years ago, has 25 per cent market share in books retail business in the country. In 2006, the ownership of the UK arm was transferred to a separate Amazon EU subsidiary based in Luxembourg, which would legitimately pay a lower tax rate.

Another Luxembourg loophole means Amazon can apply that country's lower VAT rate of 3 per cent on ebooks, rather than the 20 per cent rate applied in Britain.

In a filing to regulators that year, Amazon acknowledged that a switch of headquarters to Luxembourg was expected to 'benefit our effective tax rate over time'.

Under the contention that Amazon.co.uk is simply providing 'services' or doing 'order fulfillment' business for Amazon EU with customers' payments going direct to Europe, the company held it is not subject to the usual tax rules of UK shops.

The Luxembourg office employs just 134 people, according to the latest 2010 accounts, while the UK operation employs 2,265 people.

"Amazon EU serves tens of millions of customers and sellers throughout Europe from multiple consumer websites in a number of languages, dispatching products to all 27 countries in the EU. We have a single European headquarters in Luxembourg with hundreds of employees to manage this complex operation." Amazon wrote in an email response to The Guardian.

Experts estimate that if Amazon's taxable profits were to be calculated on the basis of rules in the US it would create taxable profits of between 266 -360 million pounds, in UK, yielding notional HMRC tax revenue of up to 100 million pounds.

Source: Europe News.Net