Amazon bags £425m in work from UK government as it is criticised over tax

Amazon bags £425m in work from UK government as it is criticised over tax

Amazon has reaped a total of £425m in UK government contracts in the past two years, it has emerged in a report, prompting fresh criticism that the tech giant is failing to pay a fair share of tax in the country.

The report, by the Centre for International Corporate Tax Accountability and Research (CICTAR) with assistance from investigative thinktank Taxwatch, finds Amazon’s highly profitable cloud computing business is increasingly being indirectly supported by taxpayers through hundreds of billions of dollars in government contracts around the world.

In the UK, Amazon benefited from £250m of government contracts in 2020 – up from zero in 2014 and less than £25m in the four subsequent years according to CICTAR. That was more than 10 times the level of corporation tax paid by the group’s main British subsidiaries that year.

Amazon’s publicly published corporation tax bill in the UK – for its largest subsidiary Amazon UK Services as well as Amazon Digital UK and Amazon Online UK – totalled £22.3m in 2020.

Another £175m of government contracts were booked in 2021. Figures for the corporation tax paid for last year are not yet available.

George Turner, the Taxwatch executive director, said: “Amazon’s history of tax avoidance is very well known but despite this the company has managed to bag a huge increase in revenue from the work it does from government.

“At the very least taxpayers will want some reassurance that their money is spent on companies that are transparent about their tax affairs and demonstrate that they do not use artificial structures to reduce their tax bill.

“The last Queen’s speech announced a new bill to reform government procurement. This would seem to me to be the perfect opportunity for government to ensure that those in receipt of lucrative government contracts also make their contribution to the tax system.”

In the UK, The Seattle-based company’s Amazon Web Services (AWS) arm provides services, for the Home Office, HMRC and the Ministry of Defence. Contracts include cloud computing services for MI6, MI5 and the Ministry of Defence including sensitive document storage, according to the report.

The report says: “While the UK government has taken some measures to tax profits generated in the UK but booked offshore, there is no evidence that these measures have been effective.”

Amazon said that the “calculations are misleading and do not include the bulk of our business. Comparing a contract value over many years, to an incorrect corporation tax figure for a single year is highly misleading.”

An Amazon spokesperson said: “We are investing heavily in creating jobs and infrastructure across the UK – more than £32bn since 2010.. This continued investment helped contribute to a total tax contribution of £1.55bn during 2020 – £492m in direct taxes and £1.06bn in indirect taxes.”

The £492m in “direct taxes” – up from £293m a year earlier – includes employer’s national insurance, business rates and stamp duty as well as corporation tax.

The company added that UK government departments using AWS were “enjoying cost savings of up to 60%”. A spokesperson said: “Public sector organisations in the UK use the UK branch of AWS Europe which registers its sales in the UK and pays all applicable taxes, due on its profits, directly to HMRC.”

A UK government spokesperson said: “Amazon Web Services is just one of the government’s many cloud service providers, and our procurement decisions are always based on getting value for taxpayers and the best quality services.”

In Australia, Amazon’s AWS arm has won contracts worth A$626m (£498m) since 2013, according to the research.

This includes a deal with the Digital Transformation Agency, which is supposed to drive improvements in the federal government’s technology, under which Amazon will receive A$560m between 2019 and 2025, as well as arrangements with the Taxation Office and a contract to run the government’s Covid-19 tracking app, which is widely regarded as a failure because few people used it.

In the US, the report says Amazon is recently reported to have signed a $10bn (£8bn) contract with the National Security Agency. The company set aside just over $2bn for US federal taxes last year according to the company’s annual report but kept its effective tax rate low with $1bn in tax credits and other benefits.

Amazon has said its US taxes “reflect our commitment to investment in innovation, our employees, and our communities”.

The findings come before Amazon’s annual shareholder meeting on Wednesday where the technology group faces shareholder pressure for greater transparency about its tax affairs. Investors will also vote on a shareholder proposal calling for an independent report into working conditions in its warehouses, a move backed by the shareholder advisory group Glass Lewis.

The Greater Manchester Pension Fund and the Oblate International Pastoral Investment Trust, supported by UK-based independent shareholder advisory consultancy Pirc, put forward the resolution on tax transparency which has been publicly backed by institutional shareholders including Norges Bank.

Amazon has recommended shareholders vote against the proposal, Amazon said it already publicly reported its tax contribution in some countries including the UK, in its recommendation document ahead of the AGM.

It said more “granularity”, on tax reporting as planned under new EU rules, would “potentially force disclosure of competitively sensitive information about our operations and cost structures and would hamper our ability to make operational decisions.”

Tom Powdrill, the head of stewardship at Pirc, said: “There’s a real risk of changes in tax regulation, and wider public policy, catching companies and their investors out, so transparency is vital. Amazon has been singled out by President Biden as having paid no federal corporate income tax in the US in 2020. Its reporting [to shareholders] does not disclose revenues, profits, or tax payments in non-US markets and it has been unresponsive to previous shareholder engagement.”

Michael Wyrsch, the chief investment officer of the Australian superannuation fund Vision Super, which looks after about A$12bn in retirement savings, said the fund would be voting in favour of a resolution.

“Companies don’t operate in isolation from communities and societies and if you’re not paying any tax eventually you’ve got nothing left … you don’t have a society,” he said.

He said Vision was also concerned about the high remuneration of company executives, which is partly based on profit.

“All this information is available to the tax authorities, we should be able to see what they’re doing. We should be able to judge, assess, how good a job they are doing.”