Home » Amazon, Bookstores, Non-US » Amazon ‘pays 11 times less corporation tax than traditional booksellers’

Amazon ‘pays 11 times less corporation tax than traditional booksellers’

12 September 2017

From The Guardian:

The UK’s bookshops pay 11 times what Amazon does in corporation tax, according to a report from the Centre for Economics and Business Research.

The Bookselling Britain report was unveiled at the Booksellers Association’s annual conference in Birmingham on Tuesday, revealing that bookshops contribute an estimated £540m to the UK economy, and pay an estimated £131m in tax, including £12m in corporation tax. This equates to 91p per £100 of turnover, the report said, which is 11 times the 8p rate that Amazon pays, according to the CEBR. Amazon’s most recent accounts show that Amazon UK Services saw turnover rise to almost £1.5bn in 2016, while corporation tax payments dropped from £15.8m to £7.4m year on year.

The discrepancy was condemned by the Booksellers Association’s Giles Clifton, head of corporate affairs. “The BA has already highlighted the unequal treatment meted out by the business-rates system to British booksellers, the staggering 17 times differential between what the Waterstones on Bedford High Street pays in comparison with the Amazon business unit a short distance away,” said Clifton.

. . . .

Godfray added: “Bookshops are currently closing at a rate of 3% per year, and 275 towns across the UK can expect to lose their bookshop completely due to changes to business rates if nothing is done. We hope that CEBR’s report encourages our government to act to protect the nation’s bookshops, and enable them to flourish.”

Figures from the BA show that there are currently 867 independent booksellers in the UK, almost half the number that existed 11 years ago.

Link to the rest at The Guardian

Amazon is not required to pay more taxes than the law of the land requires them to pay. If the company is violating UK tax laws, by all means, the country should take action to collect the underpayment.

If, as PG suspects, Amazon pays exactly what it owes under UK and EU laws, it’s not doing anything wrong. Wittingly or unwittingly, Parliament has chosen to tax physical bookstores at a higher rate than it taxes Amazon.

Amazon is not sitting on an inexhaustible pile of money. It obtains money by selling goods and services to UK (and US, French, etc.) citizens. If taxes increase on Amazon, they’ll be paid by individuals who purchase from Amazon. A tax increase on Amazon amounts to diverting more money from individuals, small businesses, etc., into government coffers.

As far as books are concerned, who’s doing a better job of providing British citizens with good reading material, Amazon, which charges much less for a book, or the local bookstore, which charges much more?

If a reader wants to pay more for the ambiance, conversation, etc., that accompanies a bookstore purchase, that is a perfectly reasonable choice. If a reader would prefer to pay less and forgo extra services beyond those necessary to acquire the book itself, what’s wrong with Amazon providing the book for less?

Additionally, a bookstore imposes all the additional costs on the city and its taxpayers of any other retail establishment of comparable size – police, fire, street cleaning, garbage pickup, etc. The sale and delivery of an Amazon ebook to a reader in that city imposes no additional costs to the public than would exist if the ebook had not been sold and delivered.

Amazon, Bookstores, Non-US

40 Comments to “Amazon ‘pays 11 times less corporation tax than traditional booksellers’”

  1. I love these.

    The answer of course is to fix their tax laws.

    Except that will hurt those the current laws were written for – which Amazon and others are playing just as the laws were intended to be played.

    So they can’t/don’t dare fix the laws Amazon is using to pay so little.

    It’s all on the wheel, it all comes back around.

  2. All these rants conveniently forget that governments tax net profits rather than gross income. Since Amazon chooses to invest the bulk of their gross revenues into growing their infrastructure (i.e., buying goods and services to build ever larger facilities) they intentionally have little directly taxable profit.
    On the other hand, governments get to tax the workers they hire and the contractors that build the facilities.

    It’s not as if Amazon piles the money into suitcases and ships it to the Cayman Islands.

    (Unlike all too many politicians.)

    • Exactly. Tax is paid on profit, not income. If Amazon pays 11 times less tax than other booksellers, then it makes 11 times less profit (around about).

    • The article title refers to the rate, not the amount.

    • This doesn’t have anything to do with income or profit. Business rates in the UK are essentially a property tax for businesses, based on the ‘worth’ – loosely related to their rental value.

      From the Telegraph:

      Business rates are taxes paid on non-residential properties, such as shops, offices, factories, and pubs.

      If you occupy a building, or part of one, that you use for non-domestic purposes, then you’ll probably be required to pay business rates. Around 1.8m commercial properties are eligible in the UK.

      Councils send out business rates bills each year, in February or March. The amount owed will depend on the “rateable value” of the property.

      This is based on the annual market rent value, which is determined by the Valuation Office Agency, using other rents in the local area to work out an average.

      These values are usually reviewed every five years and take into account the size of the property and its usage. Factories and shop floors may have a higher rateable value than stock rooms, for example.

      One imagines that the amount of tax levied against a main street retail bookstore would be more than that levied against the same square footage of a warehouse out in the sticks.

      • So instead of complaining that Amazon doesn’t cough up enough vig they are complaining that warehouses in the bookdocks pay less property tax than downtown storefronts?

        Six measures of idiocy vs half a dozen.

        Gotta love populist fools.

      • Corporation taxes in the U.K., however, are based on profit. That is what is referred to in the linked Guardian article. If it is a U.K. company, then it is based on all profits no matter where they are earned. If the company is not based in the U.K., then the tax is based on taxable profits made in the U.K.

  3. Can any Brits here explain what he’s talking about? Is he referring to two types of tax, one on revenue, and one on profit?

    Is there a tax rate of 91p per £100 levied on bookstores? Is that £100 of revenue or £100 of profit? Or is that what we get when we divide their income tax by revenue?

    In all the complaints about Amazon tax payments in Europe, I have not yet seen any that claim Amazon is violating the law.

    • That’s because they can’t. Amazon is simply doing what their own laws say they can.

      The book peddlers would rather complain than actually do something about their fading businesses. Or their IdiotPoliticians™.

      Maybe somebody ought to point them to this:

      http://www.deanwesleysmith.com/how-to-run-a-bookstore-in-2017/

      • “Amazon is simply doing what their own laws say they can.”

        So you’re saying Amazon is a law unto itself — or is this just PRONOUN TROUBLE: https://www.youtube.com/watch?v=XlzCPxxp8Ys

        • It is a paragraph.
          Who does the first sentence “they” refer to?

          • Who does the second sentence “they” refer to?

            In one sentence you are using they and their to refer to two different entities.

            Come to think of it, who does the first sentence “they” refer to? I’m inferring you mean those who are making the complaints Terrence cites, in which case “Amazon is simply doing what the complainants’ own laws say they can.”

            • Did you read the comment I was replying to?
              It’s a conversation, not an essay.

              • And I was only teasing you. But it was an ambiguous statement. Teacher’s voice: I expect better from you.

                I also expect better from me, but I’m growing blind to the @#$%ing singular they*:

                “That’s because they can’t. Amazon is simply doing what their own laws say it can.”

                *Yes, that’s the hill I’m choosing to die on.

  4. Am I the only one who dislikes the new “times less” usage? I consider “times” to be an indication of multiplication, which implies greater rather than less (and yes, I understand multiplying by a fraction causes the total to be less). How about the usage “1/11th of” or “an eleventh of” rather than “eleven times less?” No complaints about TPV, I know it’s the Guardian’s fault for this spavined usage.

  5. Typical Guardian. I suspect that comparing taxes in this way between any small and large business will yield a similar result. This is simply because of the way all tax laws and particularly concessions are structured in at least the main Western Countries.

  6. The government collects the bulk of book-sales taxes in the form of sales tax, which should be equivalent between entities, and thus not news. A comparison of corporate taxes between a book shop and a corporation where book sales are a rounding error is something only the braindead would pursue. Eventually, the corporate taxes collected from local book shops will be zero and the author of this article can then rail on the local book shop owners and trumpet the merits of the ‘Zon!

    • In the UK, paper books (and most other printed material) aren’t liable for VAT (the UK equivalent of sales tax). Of course, this benefits both Amazon and local bookshops. Interestingly enough, ebooks are liable for VAT…

  7. Guardian articles ‘distort facts 11 times more than traditional newspapers’

  8. As retailers, bookstores have it easy. Their product is non-perishable, easily stackable, unsold inventory is returnable to their supplier for full cost, AND they make around 50% of the sale price. If you can’t run a profitable business with those favorable conditions, then you shouldn’t be running a business.

    How’s this for a helpful thought: Charge publishers rent for your shelf space.

  9. Do the numbers and the statistics every way you can think of.

    Then select the version which makes you pre-determined thesis seem the most true.

    Publish.

    I got my fill of this garbage when reading medical research papers on meds and stents earlier this year. If your risk one way was 1.2% and the other way 1.8%, and the ‘researcher’ had a vested interest in the first way, the results were quoted as 50% higher risk. If the writer was being reasonable, they would mention the risk was ‘of the same order of magnitude.’

    As a scientist, I want to take them out behind the barn. They are scaring people with relative risk when the actual risk is quite small, just to sell their drugs.

    • Yes! A similar thing happens when new Treatment A is touted to be significantly better than old Treatment B, or has been shown to extend life significantly longer than old Treatment B (often with more horrible side effects, but they always downplay that).

      When I did technical writing for a company that provided interactive online information to cancer patients, my job was to translate medical research articles into understandable, plain English summaries for patients, and I sure learned a lot about the typically huge difference between “statistically significant” and what non-medical people consider to be significant.

      For example, there are TV ads for a herpes simplex salve (for common “cold sores” people get on their lips). If memory serves, in small type at the bottom of the screen it says that the use of the cream reduces the average length of time of visible infection by about a day. So, instead of 5 days it might be 4, or instead of 7 days it might be 6. A statistically significant result, certainly, but maybe not so significant when one takes a look at the cost of the salve. YMMV.

      Advertisers get away with using “statistically significant” numbers which rarely approach the kind of numbers which patients or their families would consider to be truly significant (or cost effective) in terms of improving the quality or quantity of life. The numbers the advertisements spout are real, but incredibly misleading to most people who have a very different idea of what “significant” means.

      • The most weasle-worded in my opinion, now that I’ve read, as a patient, an enormous number of these, is ‘not inferior.’

        Treatment B is ‘not inferior’ to Treatment A. But more expensive, loaded with side effects, and under patent protection (which increases the cost enormously, to the insurance companies, Medicare, and the patient).

        The final kicker is that when research paper X is referenced by research paper Y, almost any quote the writer of X wishes to use seems to be acceptable. When I followed those leads, I found they were almost always misleading and heavily biased toward the thesis the writer of X was pushing.

        Trust what you doctor says? And verify the heck out of it. It is the exact opposite of informed consent.

  10. Traditional UK booksellers taxed 11 times more than Amazon.

    FIFY

  11. It is true that Amazon has a fairly aggressive tax minimization strategy that uses a variety of corporate vehicles to hugely reduce its tax bill.

    It is also true that these structures are legal – certainly in Amazon’s use of same, possibly not on the side of EU governments like Ireland and Luxembourg who have created these loopholes to attract investment. The EU has been arguing recently, perhaps not without cause, that this amounts to illegal state aid.

    What is often left out from articles like this is that these tax minimization stragies are widely used, particularly by tech companies. Apple pioneered this approach. Google excels at it. Microsoft, Starbucks, Fiat, pretty much any multinational company these days engages in it.

    That crucial bit of context leads to a further conclusion: if you want that system to change, then pressure should be exerted at a governmental or EU level. Singling out one particular company is both pointless and indicative of a larger agenda at work.

    Interestingly, these same corporate vehicles were used by Harlequin when bilking a huge number of authors out of e-book royalties. I don’t remember the Guardian covering that – or their own use of subsidiaries in Luxembourg to reduce taxes.

    • Asian manufacturing companies like Toyota, Honda, and Nissan, among many, routinely “sell” their imported products to their local subsidiaries at prices that shift all profits to the parent companies and leave the subsidiaries with no reportable profits.

      In the tech world, the Apples and Googles don’t even bring international profits back home, to avoid paying taxes in the home country. They just let them pile up in tax havens to where they have cash reserves bigger than the GDP of several small european nations.

      • Amazon is actually a pretty bad choice to be the poster boy of the movement against corporate tax minimization. It’s nowhere near in the same league as the likes of Google and Apple and Facebook. Because the other main reason that Amazon pays less tax than its sales might broadly indicate is because there often isn’t very much profit to actually tax as Amazon is reinvesting most of it. Something that the countries it is based on presumably want to continue.

        Apple however…

    • What is often left out from articles like this is that these tax minimization stragies are widely used, particularly by tech companies.

      They are used by just about all companies. Firms have a fiduciary responsibility to shareholders to pay as little in tax as legally possible.

      The solution is simple. Eliminate all corporate tax. Then firms will stop making counter-productive decisions due to tax advantages. Ask where companies would site their plants and operations if there were no tax considerations. Things might look a bit different.

      Think what fun it would be if the Dutch answered Ireland by announcing a zero corporate tax. Or if the US dropped all other tax and instituted a single consumption tax.

      • Well the effective tax rate for large multinationals IS effectively zero at the moment. I think Apple’s effective tax rate in Ireland (through which they book all EMEA sales) is around 1% – and that’s probably offset by a variety of grants etc.

        I imagine we have very different views on what a desirable level of corporate tax might be, but perhaps we would agree that, currently at least, the corporate tax burden falls largely on small companies rather than large ones, and the former is a much bigger driver of employment than the latter.

      • “Or if the US dropped all other tax and instituted a single consumption tax.”

        Tax people only on how much they use? Sounds too simple and fair to hold any interest for most people. And I can’t imagine any situation where the US government would agree to *not* tax every single transaction/thing they could. I guess we can keep dreaming, though.

  12. “It’s not as if Amazon piles the money into suitcases and ships it to the Cayman Islands.”

    You mean like the owners of Big 5 publishers do? 😀

    • Is that where those suitcases ended up?
      They bounced around so much the tracker batteries died and NSA lost them halfway to Elbonia.

  13. Local retailers are being forced to compete against a company that has no qualms in selling products at or below cost to take market share while they make their profits from other areas like AWS.

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