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Amazon Is Overpaying Its UK Corporation Tax Bill

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That would seem to be the conclusion from this whinge about how much Amazon does pay in tax in the UK.

Amazon paid less than £300m in UK tax last year after logging revenues of almost £14bn.

Corporation tax is not paid on turnover of course, it is paid upon profit. So, in order to work out whether this is a fair amount or not let us turn to that maestro, the ne plus ultra expertus de experti, Richard Murphy. Who tells us that there should be apportionment of taxation.

The first thing to know here is that at the level of the main company, the holding one, the listed one, it’s not possible to hide profits. All that stuff about offshore and so on rather disappears in the calculation of how much profit there is.

Following that we can then say that the company as a whole made this amount. We also know what the turnover of the whole company was. We will even know, to some extent at least, what the turnover is in one particular geographic location.

At which point we can say total profit was blah blah of the total turnover, then local turnover is wibbley percent of total turnover therefore local profit should be blahblahwibbley. Apply the local tax rate and we now know what the local tax bill should be.

This is indeed the Murphy method of apportionment. Cool.

So, in 2019 Amazon’s turnover was $280 billion (or £215 billion, say) and as above local turnover was £14 billion. So, the UK is 14/215 or 6.5% of the total. Profits were, globally, $11.5 billion. So, UK profits should be 6.5% of $11.5 billion or $750 million or £575 million. The UK corporation tax rate is 20%, close enough, so the Amazon UK tax bill should be £115 million. They paid £300 million.

So, according to the now only Visiting Professor, Richard Murphy, Amazon is grossly overpaying it’s UK corporation tax bill.

Of course, all of the above is wrong because Amazon has included employer paid national insurance in its £300 million tax bill. But it is still true. Amazon should, righteously according to the self-declared expert in what is righteous in taxation, be paying £115 million in corporation tax in the UK. Who wants to try and bet that they’re paying less than that?

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