The Public Accounts Committee has lived up to its name. By extracting information from Amazon about the true size of the online retailer's UK revenues, the House of Commons committee has held a powerful firm to account – and dragged some germane information into the debate about corporate tax avoidance.
Amazon's official published accounts for 2011 suggested that it registered UK sales of just £207m. That always looked implausibly low. And so it has proved. A document released by the PAC shows that Amazon's UK sales were, in fact, 14 times larger at £2.91bn. The document also throws some light on how payments pass from Amazon's UK operation, through a number of channels, to the retailer's Luxembourg-based regional headquarters. The purpose of these intra-Amazon payments was apparently to reduce the amount of tax payable in the UK.
Amazon is reported to be under investigation by the tax authorities. And the Business Secretary, Vince Cable, has urged HMRC to be "very tough" on firms that adopt tax arrangements that are plainly abusive. But the issue of where profits should be taxed is not straightforward. When a UK company makes profits from intellectual property developed abroad, there is a reasonable case for it to pay fees to a parent company. Yet the status quo is plainly unsatisfactory with many multinationals effectively shopping around for the most favourable tax rates. This erodes national tax bases and gives large global firms an advantage over domestic retailers.
International governmental agreement would be desirable, but is difficult to achieve. Perhaps the way forward is consumer power. Let the public take a view on whether it is reasonable for a company to shift nearly £3bn worth of goods in the UK and pay no corporation tax here. And if they feel it is not, people can take their custom elsewhere. Thanks to the PAC, they can make that decision with regard to at least one well-known business.