How good is Amazon

[shed9]

Society uses a lot of pejorative language - the concept of loopholes in this context is technically wrong...
Government and its agencies (HMRC etc.) set the rules or law as to who has to pay tax, and what they have to pay...
A 'loophole' is no such thing - it simply implies that those setting the rules made a mistake and someone is legally paying money as defined by the law - but with a result the law makers didn't expect... - so they are not loopholes - they are mistakes by the law makers. The definition of loophole implies an ambiguity - these 'loopholes' are not ambiguities - they are simply occasions where the law makers construct legislation without thinking through the implications, or putting themselves in the shoes of business to work out what business is likely to do...

That's just semantics at the end of the day and not fundamental to the overall argument. That whole discussion is moot when we eventually agree on the terms to describe what is happening here. Loopholes are as ambiguous as mistakes when it comes to governmental tax laws. Call it what you want and use whatever language you want to define how it came about or remains, the reality is that the opportunity to do it exists and this is mostly true for most tax systems across the globe.

The very notion that law makers who have the ability to set anything they like as law, make mistakes and then criticise and look to penalise those who simply obey the laws as written is itself hypocritical and morally repugnant. Amazon and equivalent are meticulous about ensuring they obey the law, but of course, like anyone else if given a choice of options and one is more financially beneficial, then they will chose that one...

Meticulously following the law whilst openly and publicly avoiding tax is still openly and publicly avoiding tax. And no, not everyone takes the more financially beneficial option when it comes to tax, that's where the definition of ethical corporate responsibility comes into play. This aspect doesn't just cover tax, it covers going the extra mile in staff welfare, ecological impacting decisions & carbon reduction, etc. You could argue that this is just the long game in modifying public perception to increase long term profit margins and market share. However, even accepting that as being a simple business choice and not pure ethics or morals it still shoots down the argument that anyone given the choice to not pay tax will take that choice.

I am very honest and open about taxes - they are always paid on time and accurately - personally and my businesses... but I see no reason why I would want to go out of the way to find issues with the legislation and choose to do something to pay more?! In fact, if I did do that I could be considered to be in breach of my fiducial duties as a director of the business... so in reality the only technically illegal thing Amazon directors could do would be to find ways of paying more taxes! They could be argued to be in breach of Company Law!

I've never said that companies (or people) should seek to pay more taxes, just that they should be paying their share and doing the right thing. Tax avoidance is about paying less than expected and in some cases almost entirely avoiding it. It's not an argument of Amazon Directors being financially due diligent by not actively seeking ways of paying more tax, that's just the counter argument at the other end of the spectrum to dilute the actual premise. Don't conflate paying the correct proportion of tax as paying more tax. Amazon staff rely on the same social services as everyone else which enables those staff to function in society and thus turn up at Amazon every Monday morning. If Amazon and every other business entity or individual choose to avoid that under the guise of being their fiducial duties then that pyramid has a finite lifespan.

As mentioned above, we have complex tax legislation - if the government simplified it they would probably raise a lot more money...

That's an obvious statement but is probably a different, albeit connected, discussion.

 

[Phil Pascoe]

... I've never said that companies (or people) should seek to pay more taxes, just that they should be paying their share ...

I doubt anyone here thinks otherwise, I just don't blame anyone for legally avoiding paying it.

 

[shed9]

I doubt anyone here thinks otherwise, I just don't blame anyone for legally avoiding paying it.

But if everyone legally avoided it, would you feel the same way?

 

[akirk]

I doubt anyone here thinks otherwise, I just don't blame anyone for legally avoiding paying it.

correct... why is it Amazon’s job to determine what is a correct or fair level of tax? That is why we as a nation pay MPs and the huge staff at HMRC etc. If they are getting it wrong, and leaving ‘loopholes’ then sack them! Why is it appropriate as a nation to pay out millions in salaries to people who don’t do their job, and who then blame others when they get it wrong!

of course we all want companies to pay a fair amount, but Amazon are being honest in following the law as it is written, the law makers are at best being disingenuous by blaming them for their badly written legislation...

 

[Phil Pascoe]

But if everyone legally avoided it, would you feel the same way?

The powers that be would be forced to do their jobs properly before that situation arose.

 

[artie]

But if everyone legally avoided it, would you feel the same way?

I doubt many people pay tax they don't feel they have to.

 

[lurker]

When Junker (of EU fame) was prime minister of Luxembourg he did a dodgy deal with the likes of amazon. So U.K. tax folks are hamstrung.
This deal helps corporates to avoid billions in taxes.

 

[CornishWoodworker]

Just remember, anything bought from an Amazon Marketplace trader( ie a third party) negates any protection from your credit or debit card provider.
Bought from and supplied by Amazon is covered under the credit card rules.
Amazon may assist you in any discrepancy with a marketplace trader but credit card / debit card providers are not obliged to.

 

[Inoffthered]

The reality of international tax is somewhat different especially if there is any question of manipulation of transfer prices between subsidiary companies in different tax regimes.
I have seen how HMRC here can challenge what they claim to be artificial pricing between companies designed to move profits from high tax areas to low tax countries.
If HMRC chooses to ignore this option then it raises even more questions about whether HMRC is fit for purpose as they seem to have adopted a strategy of being strong on the weak and weak on the strong.
(Anyone that has had the misfortune to read some of the HMRC technical manuals will soon realise that they were written by F******s)

 

[Droogs]

Business tax should be simple. If I were in power then the tax law would be thus:
You will pay X% on the total amount of income from sales or investment that comes into your company over a period of 12 months that has originated at source or has been kept, in an account in this country. This is regardless of whatever costs you have incurred.
You have chosen to be in business and must accept it's costs. It is up to companies to ensure they are as efficient as possible to minimise cost and not for the public as a whole to subsidise a companies running costs by only taxing their income after those costs are deducted. After all an indiviual is not allowed to deduct all their living expenses from their wages and only be taxed on their disposable income, so why should companies?

That way no one can avoid paying tax as there are no allowances to take advantage of or abuse.

 

[artie]

After all an indiviual is not allowed to deduct all their living expenses from their wages and only be taxed on their disposable income, so why should companies?

I know it wouldn't be easy to exist on the tax free allowance, but isn't that the theory of it?

 

[Droogs]

So all your expenses in a year, every penny you use towards the feeding housing and clothing and transportation of your entire family is less than the allowance. my income for most of the first decade this century due to various factors for most years was less than the personal allowance and if not for the fact that my other half worked as well (and dumpster diving while single before I met her) , we would have starved or frozen to death some time after October in any one of those years.

You as an individual get a paltry allowance that does not cover your costs and cannot claim them either but a business can claim every penny it spends regardless on what against their tax liablility. Not fair Not right

 

[akirk]

...but a business can claim every penny it spends regardless on what against their tax liablility. Not fair Not right

Not quite accurate there are many things that a business can't necessarily claim - and complexities on how you claim other things - part of what makes our tax system so complicated... but in principle I agree with your concept that a flat charge would work better - it would also be very easy to play with as a concept for encouraging smaller businesses...

e.g.
Turnover 1 million
Allowable expenses 500k
tax at 19% on remaining 500k is currently £95k
So, a flat tax at e.g. 10% would catch that company at £100k etc.
to then encourage small businesses you can have allowances as you do for personal tax - first £50k tax free / next £100k at only 5% etc. however you wish...

however - it will have issues...
some business sectors have narrow margins / others only work because of tax-breaks and a number of tax laws are designed to support businesses which are seen to be beneficial for the country as a whole - e.g. R&D tax credits

so, yes, the maths can work to do a flat calculation, but it will have other consequences - some of which could be negative...

 

[shed9]

correct... why is it Amazon’s job to determine what is a correct or fair level of tax? That is why we as a nation pay MPs and the huge staff at HMRC etc. If they are getting it wrong, and leaving ‘loopholes’ then sack them! Why is it appropriate as a nation to pay out millions in salaries to people who don’t do their job, and who then blame others when they get it wrong!

This isn't a discussion of proportional blame against politicians and the respective government back offices, it's about the initial opening thread of Amazon being good. Avoiding tax and not paying the appropriate levels within their geographical territories is not the definition of a good business. Regardless of how legal it may be, it doesn't make them good and that is evident in the backlash they have experienced and are likely to experience going forward.

of course we all want companies to pay a fair amount, but Amazon are being honest in following the law as it is written, the law makers are at best being disingenuous by blaming them for their badly written legislation...

Again, Amazon may be legal but honest is not a term I would use in this instance. I find that an odd phrase to use for a company that is the global poster boy for serial tax avoidance.

 

[akirk]

This isn't a discussion of proportional blame against politicians and the respective government back offices, it's about the initial opening thread of Amazon being good. Avoiding tax and not paying the appropriate levels within their geographical territories is not the definition of a good business. Regardless of how legal it may be, it doesn't make them good and that is evident in the backlash they have experienced and are likely to experience going forward.

Of course it is they do pay the appropriate levels of tax - they pay what is required, they are not in business to be some moral force or crusade, they are a business whose duty is to their shareholders. So, if the people are not happy with the amount of tax they pay, then the issue must be laid squarely at the feet of those who created the rules - politicians and civil servants - whose duty is to the people. So, who has failed? Not Amazon - they are doing as they should - running a business to make money, whereas the politicians and civil servants are not doing as they should.

It really is quite simple... if society doesn't accept that following the law is correct / morally right / acceptable, then we have chaos - how would any business know how to operate - 'here is a list of rules to operate in the UK' ... 'oh, but we have written them badly, so randomly people might get annoyed with you if you follow them, so please make sure that you follow them to be legal, but only select ones which are of no advantage to you, and which will avoid people being annoyed!' It is like sending the UK out to play cricket but then telling them mid match that they are not allowed to hit the ball over the boundary - yes, it is legal, but you will upset the opposition who are not as good as you!

Again, Amazon may be legal but honest is not a term I would use in this instance. I find that an odd phrase to use for a company that is the global poster boy for serial tax avoidance.

Honesty / dishonesty is a black and white state - not a series of grayscales where someone is almost honest so either Amazon are following the law or they are not - either they are honest, or they are dishonest about those laws...

There does seem to be a UK trend in attacking anyone who is successful as being some how morally wrong / ethically unpure / dishonest / etc. It is really not complicated - the politicians and civil servants have the opportunity to set the landscape / laws - once they have, it is fair game to anyone within those constraints - if and when there are bad laws, then they should be changed... Amazon and others of a similar ilk are only under attack because they are successful...

 

[bjm]

.....it's about the initial opening thread of Amazon being good........ Regardless of how legal it may be, it doesn't make them good and that is evident in the backlash they have experienced and are likely to experience going forward.

Like it or not, what they have created IS good at what it does - it's a highly efficient platform that feeds the addicted. Nobody is forced to use it though! I'm not defending their actions but none of what they do with their tax affairs is illegal - there's only one remedy to that and our (global) political systems are incapable of dealing with it. I'd like to think there is a backlash but there are too many users who like the convenience (and can you really blame them!) to make an impact.

 

[space.dandy]

Business tax should be simple.

But, unfortunately, it isn't simple and you have just provided an example of that.

If I were in power then the tax law would be thus:
You will pay X% on the total amount of income from sales or investment that comes into your company over a period of 12 months that has originated at source or has been kept, in an account in this country. This is regardless of whatever costs you have incurred.

Let's take two examples assuming your simple tax rate is 10%:

1. Last year I paid a local small business to refit my bathroom. The total cost was £12k of which £2k was labour and the rest was materials, fixtures and fittings. Under your taxation system, the fitters would have paid £1.2k in tax, which wipes out the majority of their labour cost. There would have been no profit for the business and the workers would have shared £800 which would then have been subject to personal taxation.
2. Consider an ex-career politician on the lecture circuit. They are being paid say £20k for an after-dinner speech and their only expenses are travel and accommodation, say £1k. They pay £2k in tax and get to keep the remaining £17k, subject to personal taxation.

Your taxation system unfairly disadvantages the trades and other professions with high materials costs, and is exactly the reason why costs are tax deductible, to create a more level playing field by taxing the business on profits only.

Not only that, your 'simple' system also hinders charitable work. Assume that aunt Mavis has a problem with her plumbing and needs a plumber to come and fix it[1]. It's not a difficult problem, and probably only needs £50 in parts and an hour of time. Now, Mavis is struggling to get by on her meagre pension and John, the local plumber, knows that this will hit her hard, so he decides to take the job for free -- Mavis only needs to pay for parts. Under your taxation system this simple charitable act will cost John £5 in tax when Mavis pays him £50 for the parts.

You have chosen to be in business and must accept it's costs. It is up to companies to ensure they are as efficient as possible to minimise cost and not for the public as a whole to subsidise a companies running costs by only taxing their income after those costs are deducted. After all an indiviual is not allowed to deduct all their living expenses from their wages and only be taxed on their disposable income, so why should companies?

You are trying to compare personal taxation with business taxation and the two are very different beasts. Tax is a complicated problem and it needs fairly complex rules to deal with it. I do agree though that our system is more complex than it needs to be.

Chris
[1] That sounds a bit like some videos I've seen...

 

[akirk]

they are good examples - but it wouldn't be difficult to simplify the current deductibles system - and to e.g. simply allow the costs of the goods to be removed... effectively that is what the VAT component of tax does - VAT = value add tax, and that is what we are discussing here - so in your examples, the value add for the plumber in scenario 1 is £2k / in scenario 2 is £0 and for the speaker is £19k - so tax each of those and the tax bills at your hypothetical 10% would be £200 / £0 / £1,900 respectively - seems fair...

VAT effectively does that by allowing you to reclaim the VAT you pay against that you bill - so effectively you only end up paying the government the difference - or the VAT on your value add...

so maybe ditch corporate tax and just add onto the VAT rate?!

 

[space.dandy]

they are good examples - but it wouldn't be difficult to simplify the current deductibles system - and to e.g. simply allow the costs of the goods to be removed...

If I understand your suggestion, then no, your attempt to simplify the system has just made it more complex. You now have to differentiate which costs are 'goods' passed on to the consumer and which are simply costs of doing business. That is simple if you're just buying flat pack cabinets from Wickes, but what if you're a cabinet maker? You buy wood, some of which will end up as a 'good', some of which will be wastage and offcuts which are business costs and you have to apportion the two. How much of your 2L tub of glue constitutes the 'good'?

effectively that is what the VAT component of tax does - VAT = value add tax, and that is what we are discussing here - so in your examples, the value add for the plumber in scenario 1 is £2k / in scenario 2 is £0 and for the speaker is £19k - so tax each of those and the tax bills at your hypothetical 10% would be £200 / £0 / £1,900 respectively - seems fair...

VAT effectively does that by allowing you to reclaim the VAT you pay against that you bill - so effectively you only end up paying the government the difference - or the VAT on your value add...

so maybe ditch corporate tax and just add onto the VAT rate?!

Sorry, I'm afraid you're a little off base here. VAT is a consumer tax; VAT registered businesses do not pay VAT. The VAT component of all goods from sawmill to timber yard to joiner is passed down the chain to the consumer, with the tax increased at each stage in proportion to the value being added by that stage. That's why trade suppliers typically list prices excluding VAT -- it's not to make themselves seem cheaper, it's because VAT registered buyers don't care about the VAT, they never see it.

Your suggestion, in a nutshell, would mean that you would be asking aunt Mavis to pay your tax for you.

 

[profchris]

... it wouldn't be difficult to simplify the current deductibles system - and to e.g. simply allow the costs of the goods to be removed...

True, but then you're taxing profits, not income, which is in fact the current system!

Moving all tax to VAT has regularly been proposed, but it's known that this puts a far higher tax burden on the least wealthy and a lower burden on the most wealthy.

Complex, huh? Which is why it's worth my student writing her PhD on taxing digital companies.