How Ritchie thinks Amazon avoids tax
Posted by Christie Malry on December 8, 2012 at 9:53 pm
the creation of the structures was when the avoidance took place
If the trade does not occur in Luxembourg then the claim it does is the act of avoidance
transfer pricing is not the issue
Residence and whether there is a permanent establishment is the issue
Add the two together and what Ritchie is saying is this: Amazon has structured its business in Europe specifically so as to avoid creating a permanent establishment in the UK. It has satisfied HMRC that there is no permanent establishment in the UK. But, because Ritchie thinks Amazon should have a permanent establishment in the UK, he deems the structure they actually put in place to be "avoidance".
Please note that the term 'permanent establishment' has a defined legal meaning, which HMRC takes great care in interpreting. This is not something that HMRC lets companies off on a whim. So Ritchie is actually saying that HMRC and Amazon and their respective legal advisors are all wrong and that he is right.
Please also note that he provides no analysis to support his claim. It's just because he says so.
Updated because I erroneously started writing about Starbucks when I meant Amazon. Thanks Frances.
@fcablog comments not posting on your blog, dammit. I think you have mixed up Amazon and Starbucks
Given that Amazon has an enormous distribution centre/warehouse of its own in East Kilbride I think it would be pretty hard for them to argue that they don't have a permanent place of business in the UK.
Sorry toryboysnevergrowup, the law disagrees with you. Has done for some decades. http://www.hmrc.gov.uk/manuals/dtmanual/DT12304.htm
(3) The term `permanent establishment` shall not be deemed to include:
Martin
Then this is clearly one piece of law that needs to be amended and brought up to date to reflect the 21st century - as far as I'm concerned the place where I used to conduct business with Amazon was my computer screen here in the UK, through a dot co uk website and they clearly did most of the order fulfillment from the UK, so it clearly is something of a device to say that its place of business was Luxembourg or wherever. Given the subsequent blog post on what constitutes tax avoidance - I very much doubt that the intention of Parliament was that the provision re holding stocks was meant to be used in the manner and scale that it is now being used by Amazon in the UK - so I'm sure that everyone will agree that it looks very much like tax avoidance whatever definition is used.
http://www.telegraph.co.uk/finance/good-news/9579188/Amazon-to-hire-10000-Christmas-staff.html If this doesn't amount to a permanent establishment and conducting business in the UK then I find it somewhat difficult to believe that it is a temporary one by any commonsense interpretation of the word. Why hasn't the tax profession done anything to address this ridiculous state of affairs - Mr Murphy may not have the required skills to do so, but some questions need to be asked about the morality of those who have the skills to do so but have chosen to do nothing while pursuing their own narrow short term self interest.
And until such time as the law changes and amazon shifts its entire distribution and storage systems to France and Germany then the company will continue to only be liable to corporation tax overseas.
What you are concerned with doesn't matter when the law is as it is. Change the law, accept the consequences of the change and we'll all be happy eh? The intention of parliament is set out in black and white already, if parliament changes its mind it needs to change the law too. Even if it means higher prices for consumers and a few tens of thousand more unemployed. Can't see amazon wanting to pay more tax, can't see the EU treating the company as having two bases either - a case where EU single market rules will apply, a 21st century style rule eh?
Now as to morality - whose money should be used to meet your standards of morality? And why your standards of morality over say David Cameron's or that Muslim preacher recently stopped from being deported and released? Whose morality applies? And when are you going to have that person's morality written into law?
Using money belonging to investors to meet some moral requirement would seem to be somewhat illegal. Does morality trump legality? Would a company paying a moral requirement amount of money on top of legal requirement be subject to investors demanding their money back from the company managers?