No, no, really, it is all Harold Wilson’s fault.
Here’s the double taxation treaty between the UK and Luxembourg:
(1) For the purposes of this Convention, the term `permanent establishment` means a fixed place of business in which the business of the enterprise is wholly or partly carried on.
(2) The term `permanent establishment` shall include especially:
(a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, quarry or other place of extraction of natural resources; (g) a building site or construction or assembly project which exists for more than six months.
(3) The term `permanent establishment` shall not be deemed to include:
(a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
(c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
(d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or for collecting information, for the enterprise;
(e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research or for similar activities which have a preparatory or auxiliary character, for the enterprise.
That pretty much covers whether Amazon has a permanent establishment in the UK or not. And if it doesn’t then it don’t pay corporation tax.
And no, it’s not even tax avoidance. For here we’ve got a specific clause in the law that outlines exactly that in Amazon’s situation no tax is payable.
But why Harold Wilson then?
DT12250 – Luxembourg: Agreement
The comprehensive agreement (SI1968/1100) came into force on 12 July 1968 and has effect
a) In the United Kingdom for
i) Income Tax from 1966-67,
ii) Capital Gains Tax from 1966-67,
iii) Corporation Tax from 1 April 1966.
This is old, old stuff. Nowt to do with any politician currently in power.