Amazon UK boss: How can following the law be unfair?

Christopher North defends Amazon's tax arrangements, which have been criticised by publishers, high street retailers, and politicians of all colours

Christopher North is one of the most powerful figures in British retail, but for a period he was better known as a brand of shower gel marketed under the tagline of "rich, thick and full of it".

When the brand was trademarked by the angry cosmetics firm Lush, North, the UK boss of Amazon, was said to be "hopping mad". On Friday, however, the New Yorker who has run Amazon's British operations since 2011, laughed off the stunt: "My wife said to me, if they're planning to sell beauty products, they probably shouldn't put your picture on the package," he said.

In February Lush had cheekily trademarked the name "Christopher North" in a spat over Amazon's use of the word "lush" to sell its own lookalike toiletries. Now he finds himself back on more familiar territory for any Amazon executive: defending the company's controversial tax arrangements.

North, who oversaw £4.3bn of sales to UK shoppers in 2013 but whose unit paid only £3.15m in UK tax the year before, says it would be impossible to dismantle the online retailer's tax arrangements without withdrawing millions of products from its British website. The arrangements have been criticised by publishers, high street retailers, and politicians of all colours, as well as tax justice campaigners, because they allow Amazon to channel almost all of its European sales, and resulting profits, through Luxembourg.

"I would defy anybody to find a way to have 120m products available to UK customers if they only did that from a single UK team, sourcing products from the UK, with only warehouses in the UK. We just couldn't do that. And a single European business is going to need a single European headquarters."

He says having a single business, based in low-tax Luxembourg, taking €13.6bn (£11.2bn) sales from European customers – mainly in Germany and the UK – is "the right structure for the business".

Asked about accusations from rival retailers that he is operating on an unfair playing field because lower tax payments allow Amazon to charge lower prices, North said: "I don't particularly meet with other UK retailers. I mean, we have some UK retailers – I've named two already [House of Fraser and Debenhams] – who sell on Amazon.

"We pay all of the taxes we're required to pay in every jurisdiction around the world, including the UK … I don't think following the law gives the company an unfair advantage." For tax purposes, North and his 7,000 Amazon colleagues in the UK – in warehouses, software design, procurement, accounting, human resources, and other functions – do not work for the same company that transacts with UK customers. Instead they just provide "services" to the Luxembourg company. In doing so, latest accounts show they generated sales of just £320m, paying only £3.15m in tax.

Last summer, G20 leaders put their weight behind a programme of tax reform targeted at multinationals, such as Amazon, who are seen as avoiding huge sums through cross-border corporate structures that had not been possible before the arrival of the digital economy. In its annual report, published earlier this month, parent group Amazon Inc noted these moves, warning investors: "Our effective tax rates could be adversely affected by … fundamental changes to the tax laws applicable to multinationals. The US, many countries in the EU and other[s] are actively considering changes in this regard."

According to North, however, Amazon "simply couldn't" provide its current offer if it were required to account for itself country by country. "Imagine you come to and you purchase a pair of shoes from a fashion store. That pair of shoes might have been sourced from a vendor based in Italy, by a vendor management team based in Luxembourg, and those products may be stored in a warehouse in Germany."

The picture is further complicated by the growing army of small traders who can sell direct to Amazon customers anywhere in Europe via the website. For every traditional retailer feeling their livelihood under threat from Amazon, there is another embryonic enterprise born on the mighty online platform, many of them flourishing. There are now thousands of professional traders who turned over sales of more than £250,000 on, and the figure grew by 32% last year."

Commissions from these sellers helped Amazon to increase UK sales by almost 13% last year – enough to be the envy of the UK retail industry, but, incredibly, still well behind the pace of growth in Germany and the US where sales were up about 20%.

"Making country-by-country comparisons is difficult," an Amazon spokesman said. "We're very pleased with our continued growth in the UK and worldwide, and know that it will only come if we continue to find ways to delight customers."

Amazon continues to invest heavily in the UK, rapidly adding distribution depots to complement its eight vast warehouses, in order to meet their next-day delivery promise to customers subscribing to Amazon Prime services. A ninth warehouse is also planned in Ashford, Kent – though not without opposition.

The GMB has seized upon the expansion as an opportunity to highlight what it argues is Amazon's poor employment record, suggesting that between 75% and 80% of warehouse staff work on a casual basis, many employed on minimum wages by outside recruitment agencies. Amazon has different figures. It says the only one in five of its staff working in the UK, including agency staff, are employed on a temporary basis.

"Amazon deliberately sets up in rundown areas. These are jobs of last resort, and they effectively come with huge state subsidies. Meanwhile, Amazon don't have the decency to pay what they should in tax," said GMB national organiser Martin Smith.

North paints a different picture, insisting Amazon pays a competitive wage "to attract the best and brightest we can". He says Amazon also takes responsibility for the employment terms of agency staff in its warehouses. "We think morally its is our responsibility to ensure they are safe and are properly compensated."

North is watching with interest Amazon's experimental offer called "Pay to Quit" recently made available to US staff. In theory the scheme is designed to weed out disgruntled staff. "If somebody would rather have $2,000 than continue working at Amazon, then we don't want them to stay," explains North. "It's probably better for them, and for us, if they go somewhere else."

He suggests, if successful in the US, the offer may be extended to staff in Germany, where there was a warehouse strike last week, and to the UK were the GMB and other unions are focusing recruiting efforts.

• This article was amended on 26 April 2014, we initially identified GMB national organiser Martin Smith as Martin Short.


Simon Bowers

The GuardianTramp

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