PLANK DECEMBER 15, 2012
On December 11, Slim Smith decided to take Shindig!, the cult British music magazine he publishes, off Amazon.co.uk. With Christmas just around the corner, it was a risky move. But Smith was so angry about Amazon’s tax evasion that he didn't want the site to make any money from his magazine, even if the decision cost him sales. “On a personal level, I don’t have to shop at Amazon, but this magazine I publish was being sold there. That put me in a bit of quandary,” he told me.
From 2009-2011, Amazon booked U.K. sales of $11.5 billion, but paid just $3.7 million in corporation tax. That is not illegal—Amazon’s European operation is based in Luxembourg, which has a very low tax rate—but, at a time when the British government is cutting spending on everything from aircraft carriers to maternity services, Smith thought it immoral that the Internet giant is squirreling so much money out of the country.
On the Shindig! website, therefore, alongside the cover of the new issue (a cover story about “the Stones’ dalliance with psychedelia”) is a button labelled “Boycott Amazon,” which links to the Ethical Consumer website and a pro forma letter of complaint you can send, with a click of your mouse, to Amazon. Ethical Consumer has no figures for how many people have become ex-Amazon shoppers since it launched the letter last weekend, but spokesman Tim Hunt said the site’s traffic has doubled.
The website is riding a growing wave of anger in Britain against multinational companies that use clever accounting to minimize their tax payments while benefiting from a society supported by the country’s welfare system. The protesters’ weapon is the boycott, and they won their first victory last week, when Starbucks voluntarily agreed to hand over $32 million to the government.
The coffee chain had previously defended an arrangement under which it sold $1.9 billion worth of coffee and food over the last three years, but paid not a penny in corporation tax. Under a complex accounting scheme, its British subsidiary paid royalties to a Dutch subsidiary for brand rights, recipes, and the coffee-roasting process, and bought its beans from a Swiss subsidiary, thus erasing any taxable income in Britain and booking it in Switzerland and the Netherlands, which have lower tax rates.
This was not illegal, but was enough to anger increasingly accountancy-savvy protesters. “No one else has any choice about whether they pay tax, but for the multinationals it seems to be voluntary. This has taken a while to sink into people’s consciousness but I think we will see it grow and grow,” said Hunt.
Amazon and Starbucks are not the only U.S. firms to find themselves in the crosshairs. Campaigners are urging boycotts of Google, Facebook, Microsoft, Apple and others that, they say, are benefiting from the infrastructure created by British taxes while minimizing the amount the companies contribute in return.
Parliament’s Public Accounts Committee, chaired by Margaret Hodge, a minister in the previous Labour government, grilled executives from Google, Starbucks and Amazon last month. “We are not accusing you of being illegal, we are accusing you of being immoral,” she said. Days later, she called for a boycott. So have some ministers from the Liberal Democrats, the junior partner in the governing coalition. "At times of hardship, when tens of thousands of British companies are paying their basic tax, to discover that leading multinationals are getting away with it is not acceptable,” Business Secretary Vince Cable told the Guardian. "They are taking a lot of value out of the British economy and British consumers, and putting little in."
Conservative Chancellor George Osborne, speaking to MPs last week, promised an extra $248 million for tax inspectors to help them stop tax evasion. But that naturally will not halt the entirely legal means that multinationals can use to move profits to where tax rates are lowest. In the absence of coordinated international action to alter global tax treaties, therefore, concerned consumers are left with the boycott.
BOYCOTTING THE WEB GIANTS is far harder than changing your coffee-buying habit, however. Hodge’s email address is a Hotmail account, so anyone boycotting Microsoft cannot write to her with their thoughts. The search function on the website of the charity Christian Aid, which has been touring the country speaking against tax evasion, is powered by Google, so boycotters cannot find out about the campaign if they are determined to avoid all of Google’s products. Church Action on Poverty, meanwhile, urged a one-day boycott of Facebook—by reaching out to the 4,300 followers of its own Facebook page, where a lively debate ensued (thus boosting Facebook’s traffic).
As for Amazon, U.K. sales for Kindles during this pre-Christmas period are three times higher than last year.
This may all explain why these companies are not rushing to follow Starbucks’ lead with voluntary payments to the government.
"We make a substantial contribution to the U.K. economy through local, payroll and corporate taxes," the company said in a statement ahead of its grilling by Hodge’s committee in November. "We also employ over 2,000 people, help hundreds of thousands of businesses to grow online and invest millions supporting new tech businesses in east London. We comply with all the tax rules in the U.K."
And since then it has become, if anything, more defiant.
“I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate,” Google Chairman Eric Schmidt told Bloomberg, after it reported that Google avoided paying income tax by shifting $10 billion in revenue into a shell company in Bermuda. “It’s called capitalism… We are proudly capitalistic. I’m not confused about this.”
Governments across Europe will have to work together if they are to claw taxes back from companies as large, confident, and savvy as these. With a cold winter ahead and austerity bringing wage squeezes and spending cuts across the continent, it will not be too long before politicians decide fighting the corporations will win them more in votes than it costs them in money.
So far, neither Google nor Amazon has shown any sign of changing their arrangements, or of being afraid of customers deserting them for rival websites or brick-and-mortar shops. They are probably right not to worry; it would take a giant reduction in their sales to dent their massive growth among Britons, who spend more online than shoppers in any other major country.
Still, a small dip for an online giant can be a windfall for smaller operators like East London’s Broadway Bookshop, a traditional store where books are packed floor to ceiling and staff members can recommend, off the top of their heads, a good book on fiscal policy.
“Well, I don’t know if it’s anything to do with the boycott, but this week has been a real boom. Our Christmas sales don’t normally pick up until next week,” Jane Howe, the owner, told me.
And could she get a copy of Shindig!?
“I could get it in by Friday,” she said. “Is that any good?”