Tuesday, November 13, 2012

Amazon.com (AMZN) and Google Inc (NASDAQ:GOOG) accused of being immoral in the U.K.

U.K. authorities have, for some time now, suspected Internet companies such as Amazon.com, Inc.(NASDAQ:AMZN) and Google Inc(NASDAQ:GOOG), of paying lesser taxes than are warranted by their income.

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The two companies have been accused of intentionally hiding their profits from their operations in the country in order to lower their tax liabilities.

The allegations have been made by a committee comprising Ministers of Parliament.

Matt Brittin, who heads Google's North European operations, appeared before the committee and explained that the company's international operations are based in Ireland since the corporate tax rates are lower in the country at 12.5 percent.

According to a report in Digital Trends, "The company’s filings show that it had £2.5 billion worth of sales in the United Kingdom last year, but despite having a profit margin of 33 percent, managed to pay only £3.4 million in taxes. That’s because it diverts non-US sales through the Irish headquarters, which asks for just 3.2 percent in taxes on non-US income."

“Like any company, you play by the rules [and] manage costs efficiently to offer fair value to shareholders,” Brittin told the committee.

This argument did not however impress committee chair, Margaret Hodge, who accused the company of being immoral in its dealings, if not illegal.

It fared even worse for Amazon's director of public policy Andrew Cecil, who was accused of being totally evasive. He was unable to tell the committee who owned the company and unable to give details about the income generated by its British operations.

Hodge said that he was clearly “not a serious person” to appear before the committee, pointing out that British customers who order books from the site, and receive their orders shipped from a British depot, and yet Amazon seems to be paying taxes on those sales in Luxembourg (Amazon.co.uk paid £1.8 million in taxes last year on £200 million turnover according to the company’s own figures), the Digital Trends report said.

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