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About LinkBacksRead more.On over £7.5 billion of sales!
Read more.On over £7.5 billion of sales!
Welcome to free trade I guess.
Hardly news.
http://en.wikipedia.org/wiki/Transfer_pricing
Society's to blame,
Or possibly Atari.
The second to last paragraph should say "2,000" not "2,00".
As annoying as it is, if the system is broken, why not take advantage of it? EVERYBODY else does.
I say make them pay or shut down their UK operations. Why should such a large company get away with robbing the UK tax payer of such huge sums of money? Just because others get away with it doesn't make it right (otherwise I would go rob my local post office - after all, others have done the same thing and got away with it!).
Oh, that's a wonderful idea.Originally Posted by debs3759
Then, they won't be paying any VAT on the profit margin on those billions of pounds in sales, and they won't be paying employer's national insurance on 2000 people's salaries, and their employees will be claiming the dole instead of paying income tax and national insurance to the tune of, what, about a third of their earning above the level of basic personal allowances.
You'd need to tale a long, hard look at Amazon's accounts before being able to draw any sensible conclusions about their corporation tax position. For a start, you'd need to look at the extent of capital investment programs and how they're financed, because at the very least, the annual cost of most of that financing is likely to be offset against profits.
Does anyone here have any real grasp on the level of expenditure necessary to set up a major warehousing and distribution operation? The level of up-front costs for equipment, for instance? Because an element of that capital will depreciate, every year, and will be offset against profits before tax. And the expenditure is HUGE when you're setting up custom-built and custom-equipped warehouses.
Are Amazon avoiding tax with sneaky corporate structures, and international transfers? Quite possibly. But unless you've analysed their accounts, you simply don't know. But if they are, then the solution is to change the tax laws, and shut loopholes .... which is not as easy to do as it sounds, especially where EU laws are involved. But suggesting they are just forced to shut down is sheer idiocy.
The tax system in the UK is absurdly complicated. In my opinion if they drastically simplified it, there would be much less avoidance.
Love the way people who always shopped at Amazon and saved themselves a ton of cash are now blaming the very store and want to shut it down. Consumers have no dignity these days.
No, NOT everyone does. I don't, for example. Just because a lot of people do something, doesn't make it morally or socially acceptable to do it.
Benefit fraudsters say the same argument: I can get away with it so why not? Because the rest of us work and pay taxes to pay for services, not so that you lazy kludgers can sit at home watching Jeremy Kyle all day! I regard it as theft, and this tax evasion is no different from the moral standpoint.
The common perception that the rich make use of tax loopholes and Swiss banks (and always get away with it because of legal technicalities) really does not help this situation.
With the current coalition seemingly targeting the poor and/or elderly alone to foot the tax bill, this is really very saddening news. Companies like this really need to grow a pair and start thinking about the society in which they operate, not just about their bottom line.
If what they are doing is legal then we only have our inept governments to blame for making hole filled tax laws and signing too many free-trade agreements. It is expected by shareholders that a company to do whatever it can within the law to maximise profitability.
Given Amazon are reducing their costs which in turn means they can offer lower prices to us (which is good for business by increasing overall turnover) it helps to explain why they so often undercut the rest of the market but also becomes somewhat harder to complain about...
How much tax do they pay in Luxembourg I wonder?
Forgive me, I'm not a tax expert so technically these are questions but:
1) I thought VAT was due on the sales, not the profit (that would be related to (corporation tax?)
2) From the way I read this article, they haven't paid any VAT at all. Ignoring everything else that is a fair chunk of money owed right there.
3) I thought that the VAT was liable at the point of consumption (i.e. the UK), not the point of supply (which would be, according to Amazon, Luxembourg). This was the reason I thought tourists could be exempt/claim it back when they left the country with UK purchases.
Any clarification on these points gratefully accepted.
Absolutely. But that simplification has to be thought through carefully, or it could end up being more damaging than helpful. Sometimes, there are good reasons for exceptions and specific allowances, but every time you create one, you also risk creating an anomaly, or an unintended consequence.
The system needs to be simpler. Much simpler. But it needs to be done intelligently and carefully .... not least, because as soon as you tamper with anything that means someone loses a get-out clause they had, they'll bitch about it. Look at the stupid farce over a minor VAT-amendment to address a long-standing anomaly that was referred to as "pastie-gate".
Okay, I may have misread the not paying VAT anyway - it refers to Play.com etc. On the other hand, given Amazon (Indigo?) operates from the channel islands - are they VAT dodging too?
I'm fine with this.
I buy loads of stuff from Amazon - the savings I get on the stuff I purchase, easily outweighs any benefits I'd get back from them through an increase in their tax contribution.
On a slightly less selfish note, I've just given up on expecting any company to pay "what we expect". Tax system is completely stuffed and any company with the means to avoid tax, that doesn't, deserves to have their board fired.
If what they're doing is illegal, then by all means prosecute them. Otherwise, it's our problem and we should just vote for tax reform or shut up.
Nope, margin.
It's complex in the way it works, but every VAT-registered business collects VAT on outputs (i.e. sales). So you're right in that. But they also off-set VAT paid on inputs (i.e. most purchases) and pay the difference to HMCE.
If I buy a widget from you that you sell at £100, you get paid £120 (i.e. £100 for the widget, plus 20% (=£20) VAT.
So I pay you £120.
I then sell it to Joe Public for £150 +VAT = £180.
So .... the goods, i.e. excluding VAT, cost me £100, and I sold at £150. So my margin is £50.
But I paid you £120. You have to pay £20 of that to HMCE, so you only get to keep the £100.
I, on the other hand, reclaim the input VAT (£20, that being the VAT on £100) but have to pay over to HMRC the VAT on £150, that being £30.
So if you look at it, my VAT return (if that were the only transaction in the quarter) would read
VAT due on Outputs (A) = £30.
VAT reclaim on Inputs (B) = £20.
VAT due to HMRC = A - B = £10.
So, my margin was £50. The VAT rate is currently 20%. And 20% of my £50 margin is £10.
Think about the name, VAT..... Value Added Tax.
The way it works is that every stage of the production process makes a margin, and charges VAT on it, because they reclaim VAT on inputs. So if there's 10 stages, maybe from the company that mine the metal ore, to the shipping company that moves it, to the refinery that extracts the metal, to the distributor in your country, to the wholesaler, retailer, and so on, then at EACH stage, they pay VAT on their outputs but whatever they charge on their sales is reclaimed by the next stage up the line, provided that the next stage is a business, and a VAT-registered one.
So at every stage, VAT collected by the seller and VAT reclaimed by the buyer are equal and opposite, so net each other out exactly. Until you get to either a consumer, or non-registered business, who cannot reclaim anything.
At that point, the seller charges VAT to you, the consumer, but still reclaims the VAT on the cost of the product they bought. So what they actually pay over to HMCE is VAT on the difference between the price they bought at and the price they sold at. i.e. their margin.
There are wrinkles to that, such as those using the flat-rate scheme, or goods not at standard rate, and all sorts of special situations, but the above is the basic principle.
And, as a VAT-registered business, I also get to reclaim the VAT on (almost) any purchases I make for use in the business. If you and I, as individuals, both buy a £1000 laptop from Dell, but your a consumer and I bought it for the business, then reclaim the VAT (£166.67) and the laptop ends up costing me £833.33. In the above explanation, "inputs" doesn't just include things I buy to resell, but things I buy to use ion the business, like computers, printers, office desks, printer paper, and so on. There are exceptions, handled in exceptional ways, the biggest one being cars, but most products fall into that model.
Not necessarily. Again, it depends on the level of inputs and the level of outputs. There have been quarters where HMCE have ended up sending me a cheque for the VAT they owe me.
It also depends on the tax point, and the location because VAT is an EU-wide system and there are some quite complex rules for VAT-accounting between different member states, not least because they may be charging different rates.
All may not be as it seems.
Non-EU residents can claim it back, yeah. EU consumers can't, but as per the previous point, there are intra-country transfers, and every VAT return I fill in, I have to account for intra-EU sales and purchases (which is why I generally avoid doing any).
But VAT isn't like a sales tax, where nothing happens right through the production change, and it finally gets levied on the end consumer. It's the "value added" thing, with a charge levied on the "value added" (i.e. margin) at each and every stage, but reclaimed by VAT-registered people if they are the next stage. If I buy something from Amazon for my business, they charge me VAT, and I reclaim it. So no, it's at the point of supply, but the reclaiming of input VAT nets it out, and the
effective result is that it's at the point of consumption.
It is, if you like, the difference between the mechanics of how it operates, and the overall impact at the end of the process.
If you think through the above process, you'll see that every stage of the process pays the VAT to HMCE on their margins ... assuming they sold at more than they bought at, which is generally a good idea in business. What HMCE gets, therefore, is a series of VAT on margins, which added up, total the rate of VAT applied to the margins of each and every link in the chain. But it's margins it's charged on. If there are three stages, at each stage makes £100 profit on an item, then each pays £20 (20% of £100) to HMCE, who end up with 3 x £20 = £60.
And those three margins of £100 = £300, and 20% of £300 is .... yup, £60.
So it's a tax levied on the profit element, at each stage of production, but each stage reclaims all the VAT they paid out except the bit on their profit margin. The consumer ends up paying VAT on the profit margin (value added) at each stage, which accumulates into the profit margin of the whole chain.
I hope that explains it. It's actually pretty simple (in concept, though bleeping complex in practice) once you grasp it, but not easy to explain in simple words on a forum. Hence the lengthy ramble.
Would probably have been better to say pays no Corporation tax, but provides x number of jobs, pays VAT of x, buys stock of x, etc etc and is therefore a net benefit to the economy of X plus knock-ons.
Would you rather they just moved it all to Europe and posted it to you ?
Society's to blame,
Or possibly Atari.
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