Shoppers have been urged to boycott Amazon's British business after it paid just £4.2m in tax last year, despite selling goods worth £4.3bn – more than the UK sales of Argos, Dixons or the non-food arm of Marks & Spencer.

Margaret Hodge, chair of the public accounts committee, said shoppers should find alternatives to the Seattle-headquartered retailer, after consumer action persuaded coffee chain Starbucks to resume UK tax payments last year.

"It is an outrage and Amazon should pay their fair share of tax," said Hodge. "They are making money out of not paying taxes. I no longer use Amazon. We should shop elsewhere. What we demonstrated with Starbucks is the power of the consumer voice."

Amazon's most recent charge brings to just over £10m its contribution to the public purse through corporation tax in a decade. Over the last four years, Amazon has generated £23bn in British sales. It made a tax contribution of £3.2m the previous year.

Amazon is able to pay low tax because when shoppers in Europe buy from any of its local websites, the payment is taken by a subsidiary based in the low tax jurisdiction of Luxembourg. A British shopper's bank statement will show a payment to Amazon EU S.à.r.l. rather than Amazon.co.uk.

Amazon's British arm employs thousands of staff in warehousing, software design, accounting, human resources and other functions. For tax purposes, its role is simply to provide services to the European master company in Luxembourg.

"People will look at this and feel it's incredibly unfair," said Tory MP and tax campaigner Charlie Elphicke. "That they work hard and pay their taxes while big American multinationals engage in industrial scale tax avoidance. This is why international tax reform is badly needed and why the chancellor has been right to make the international case. Tax abuse is wrong and must be stamped out."

The UK company declared a turnover of £449m for 2013, up 40% on 2012. However, this money was not raised from sales but in payments for its warehousing, distribution and administrative work, such as negotiating purchasing deals with book publishers.

Amazon gives a fuller picture of its UK revenues in regulatory filings to US investors, and this data showed a growth in UK turnover of 13% during 2013, to $7.3bn (£4.3bn). The rise was lower than in previous years, but enough to overtake Marks & Spencer's entire UK revenue from non-food items.

The £4.2m in tax paid is just 0.1% of Amazon's UK revenues in 2013. But the Treasury sets corporation tax as a percentage of profits. Amazon.co.uk reported profits of £17m in 2013, and effectively paid 24% of that in corporation tax.

Hodge said: "If you are an Amazon user you get endless emails saying Amazon.co.uk. You then order your goods and you get them delivered by the Royal Mail in parcels stamped with the Queen's head, and they then pretend it's nothing to do with business in the UK. They are damaging British jobs. If you are a small bookshop in the high street you can never compete with their prices, because you pay taxes. Even for John Lewis their future is also threatened because they pay their taxes."

Amazon's British business, whose accounts were published at Companies House on Friday, increased its headcount by 41% during the year, to 5,912, although during a recent interview the company said it now employed 7,000 staff in the UK, with many more seasonal workers joining its warehouses at Christmas.

Amazon said: "Amazon pays all applicable taxes in every jurisdiction that it operates within. Amazon EU serves tens of millions of customers and sellers throughout Europe from multiple consumer websites in a number of languages dispatching products to all 28 countries in the EU. We have a single European headquarters in Luxembourg with hundreds of employees to manage this complex operation."