As the row over Amazon’s tax contributions continues, the company are predicted to reveal a cash pile of up to $9bn (£5.7bn) after record Christmas sales, this week.
Amazon’s savings are held in cash and investments, and according to some analysts*, this has ballooned to between $7bn and $9bn, from $5.2bn in September.
With many people laying the blame, of the collapse of high street chains HMV and Jessops, solely at Amazon’s feet, the news will surely cause outcry amongst those arguing for a much tougher tax policy for the online distributor.
Amazon has continually been under fire for paying minimal levels of corporation tax in the UK and other European markets. So much so, that the issue is being discussed in parliament this week, with the public accounts committee resuming its inquiry into tax avoidance.
So how exactly does Amazon get away with paying so little levels of business tax? Simply put, the company funnels revenue out of countries like the UK, through a range of payments to subsidiaries. These payments are typically in the form of loans and royalties for intangible assets, such as the installation of technology developed in house, or the use of the Amazon brand. While this is not illegal, many people class it as morally wrong, and as we have discussed before in an earlier post (What led to the demise of HMV?) this has greatly influenced the downfall of UK high street shops.
Until the corporation tax laws are tightened, companies are going to continue to find ways to save paying tax, and while we do not agree with the way Amazon avoids the issue, it must be said, they are merely doing everything legally possible to save tax. The financial reward of doing this, far outweighs the moral outcry (according to Amazon anyway) and you cannot argue with a company which has increased savings by between $2bn and $4bn in just 13 weeks. After all, isn’t it a fundamental business rule to cut costs and increase savings?
One thing is for certain; as the government continues to look for ways to bring more money into the economy, we don’t feel it will be too long before these large corporations are taxed by new laws and legalisations, leading the way for the companies to try and find additional loopholes to once again escape the bills. The cat and mouse cycle of corporation tax continues.
*Analysts Figures sourced from http://www.guardian.co.uk/technology/2013/jan/27/amazon-cash-pile-record-christmas?CMP=twt_fd
Image by Aurelijus Valeiša