Wednesday, October 10th, 2018
Amazon Tax Bill Falls Despite Profit Leaps
Though the corporate tax bill for Amazon’s main UK subsidiary was about £4.6 million last year, it only shelled out £1.7 million in taxes to the UK. The tech powerhouse, however, did nothing wrong because it took a massive deduction from share-based awards that it gave to employees. It is a legal way for companies to pay less taxes in the UK.
Despite the legality of its actions, politicians and tax hawks have criticized Amazon for not paying is fair share, especially since its profits surged to more than more than £72 million last year. Amazon is just one technology business that is scrutinized for its complex financial structures and tax arrangements. To combat this, politicians and other entities have floated the idea of imposing taxes on revenues for companies in this industry. Currently, in Britain, corporations must pay 19% of their profits in taxes. By 2020, the government wants to lower the rate to 17%.
How Amazon Managed to Save
Amazon has consistently and significantly expanded its operations in the UK by hiring more workers and generating more revenues in the country. Though the UK has praised its commitment to job creation, it has been hindered by Amazon’s reputation for trying to skirt taxes and its complex business structure.
Amazon has more than 25,000 employees in the UK. Share-based awards were given to all of its full-time employees at its UK Services subsidiary, which handles the company’s logistics and warehouse operations. These awards are what allowed Amazon to cut its tax bill. Businesses, specifically technology businesses, give employees shares in their businesses to reward them as the companies begin to grow and expand. These rewards were created as incentive to get the most talented workers to come on board while the start-up gets off its feet. However, they end up getting criticized for how they impact tax structures.
Amazon was really able to reduce its tax obligations in the UK because both its share-based awards and its share price grew. During the past two years, Amazon’s stock prices climbed 84%, giving share-based compensation a significant boost. Amazon was able to reduce its tax liability because share awards are deducted under standard UK tax rules.
Hurting the Little Guys
Advocacy groups that want all businesses to pay their fair shares of taxes demand reform. They claim global players, such as Amazon, are hurting small and medium-size businesses. These businesses do not have resources or the staff to be more aggressive at reducing their taxes rates and get a better handle on their market shares. Advocates say the playing field must be leveled.
What Smaller Businesses Need to Do
The unbalance that exists between major global businesses and smaller companies is exactly why businesses need to ensure they are not getting gouged on its payment processing services.
To make sure you have the best terms and rates, you need to turn to a reputable payment expert in the UK, like Best Payment Providers (BPP). BPP can easily guide you to get approved for the best merchant services UK. As a reliable and experienced comparison company, BPP reviews contracts, rates, and fees to ensure you’re getting the best deal, and it does not charge for a consultation. Most importantly, Best Payment Providers will work to ensure you don’t overpay due to misleading language, hidden costs, and deceptive sales tactics. Every business deserves a chance to grow with the best merchant services UK.