Amazon UK paid £2.4m tax last year, despite £4bn sales

Amazon UK sales are routed via a Luxembourg affiliate

Amazon's UK subsidiary paid £2.4m in corporate taxes last year, the online retailer's accounts show, despite making sales of £4.3bn.

The tax bill was almost as much as the £2.5m in government grants Amazon received over the same period, according to a Companies House filing.

The taxes are relatively low compared to sales because the company earns its profits in Luxembourg.

Labour MP Nick Smith described Amazon's tax contribution as "pathetic".

But Amazon has always insisted that it pays all required taxes in every jurisdiction that it operates in. Companies only have to pay tax on any profits they make rather than the value of their sales.

Revelations about the tax arrangements of companies including Amazon, Google and Starbucks have sparked a debate about tax avoidance in the UK.

Matt Brittin, head of Google's northern European operations, is expected to be questioned by MPs later on Thursday over the company's tax affairs.

Tax implications

The companies say they follow the rules, but Prime Minister David Cameron recently urged countries to work together to clamp down on aggressive avoidance schemes.

Amazon.co.uk is thought to have classified itself as a service provider to its Luxembourg business, Amazon EU Sarl, in order to reduce its tax bill. Its UK business employed 4,200 people at the end of 2012, compared with 380 in Luxembourg.

The £2.4m tax bill was just below the £2.5m aid it received from the Scottish government last year to expand its warehouse operations in Dunfermline and Gourock.

Labour MP Nick Smith said: "HMRC should be going through this company's tax arrangements with a fine-tooth comb."

John Hemming, a Liberal Democrat MP, said the figures showed the failure of existing rules to tackle the problem of companies squirreling their profits in tax havens.

"The government clearly needs to do a detailed study on how to handle the tax implications of e-commerce," he said.

Analyst George Godber from Matterly Asset Management said the onus was on the authorities to change the rules, rather than on Amazon to pay more tax.

"We love to attack Amazon, but if they've operated within the laws and rules and regulations, then they've not done anything wrong. It is the laws and regulations that are at fault," he said, speaking on the BBC's Today programme.