Amazon Pays UK Corporation Tax for First Time Since 2020: A Turning Point for Big Tech?

Amazon, the retail behemoth, has finally made a splash in the UK’s tax waters, paying corporation tax for the first time since 2020. After the end of the “super-deduction” tax break, which allowed companies to reduce their taxable profits based on capital investments, Amazon UK Services paid £18.7 million in taxes last year. The company, which employs half of Amazon’s UK workforce, raked in £27 billion in sales during the same period.

The super-deduction, introduced by Rishi Sunak when he was chancellor, allowed businesses to claim 130% tax relief on investments like plant and machinery, turbocharging capital spending. While this break was great for companies looking to expand, it reduced the amount of tax they had to pay. Amazon took full advantage of it, receiving tax credits in the previous two years – £7.8 million in 2022 and £1.1 million in 2021. But with the deduction now over, Amazon is finally starting to pay its dues.

The company’s tax affairs have long been a hot topic. With over 25 warehouses in the UK and more sales than traditional British retail giants like Marks & Spencer, many have wondered why Amazon’s tax bills didn’t seem to reflect its size. In 2023, Amazon’s total UK tax contribution, including business rates, national insurance, and corporation tax, rose to £932 million, but critics say that this is still a drop in the ocean compared to its massive revenues.

So why has Amazon’s tax bill increased? In part, it's due to the company slowing down its capital investments and the reduced availability of tax breaks. Without the super-deduction, Amazon must now rely on the less generous “full expensing” scheme, which only allows for 100% relief on qualifying investments.

But the story doesn’t end here. While Amazon has made progress in paying more taxes, critics, including unions, are calling for greater transparency. They argue that the public has a right to know exactly how much profit Amazon is making in the UK and how much tax is being shifted abroad to places like Luxembourg, where its European headquarters is based.

With Amazon’s tax contribution rising, the question is whether this is a signal of things to come or just a temporary blip. Either way, the issue of fair taxation in the age of global giants like Amazon is far from settled.

Glossary:

• Business rates: A tax on properties used for business purposes, including retail stores, warehouses, and offices.
• Capital investment: Money spent by a company on acquiring or upgrading physical assets like property, industrial buildings, or equipment.
• Corporation tax: A tax imposed on the profits of companies.
• Direct taxes: Taxes paid directly by an individual or company to the government, such as income tax or corporation tax.
• Full expensing: A tax policy allowing businesses to deduct the entire cost of certain capital investments from their taxable income in the year they are made.
• Super-deduction: A temporary tax break introduced by the UK government that allowed companies to deduct 130% of the cost of qualifying investments from their taxable profits.

Retrieval Questions:

1. What caused Amazon UK to pay corporation tax for the first time since 2020?
2. What was the “super-deduction” and how did it benefit companies like Amazon?
3. How much did Amazon UK Services pay in total taxes in 2023?
4. Why has Amazon’s tax contribution become a subject of public criticism?
5. What tax policy replaced the super-deduction in the UK?