Rishi Sunak’s ‘super deduction’ could let Amazon wipe out its bill


The paltry amount Amazon pays in corporation tax could be wiped out by Rishi Sunak’s new ‘super deduction’, campaigners said yesterday.

Amazon’s British sales soared 51 per cent to £19.4billion last year. Its warehousing arm, Amazon UK Services, paid £6.3million in tax in 2019 despite raking in £3billion in sales.

But campaigners say the firm could eliminate its tax liability altogether.

The super deduction lets firms slash tax bills by 25p for every £1 spent on new equipment. George Turner, of the campaign group TaxWatch, said it would be lucrative for firms such as Amazon whose sales surged in the pandemic.

He added: ‘It is questionable whether a tax cut for Amazon today is best use of public money.’

Lord Sikka, a professor of accounting, said: ‘The deduction simply legitimises tax avoidance by big technology companies.’

Amazon declined to comment. It has insisted it paid all UK taxes due.

Paul Monaghan, of the Fair Tax Mark campaign, said the tax cut bonanza could be even bigger for Amazon if government proposals to offer relief related to research spending and employee share schemes also go ahead.

He added: ‘This tax relief is likely to obliterate any remaining corporation tax payments we might have seen from Amazon – it should have been far better targeted.

‘Companies like Amazon do not need these kinds of allowances to encourage them to grow. This is going to backfire.’

Under the super deduction announced in Wednesday’s Budget, firms will be able to deduct 130 per cent of the cost of investment in new equipment from their taxable profits.

This means a firm that spends £10m on machinery could deduct £13million from its taxable profits.

At the current corporation tax rate of 19 per cent, that would mean a tax bill saving of nearly £2.5million.

Amazon has spent far more than this on new equipment in recent years – meaning its savings could be even greater if it takes advantage of the relief.

Analysis by Taxwatch found that if the super deduction had been available during 2019, when Amazon UK Services Ltd invested £162million in new equipment, the firm could have knocked £211million off its taxable profits.

The company reported a profit before tax of about £102million – meaning the amount of UK tax it paid would have dropped from £6.3million to zero.

It spent even more – £238million – on such equipment in 2018, a sum that would have also wiped out its taxable profits.

Source: Dailymail