Anger over internet giants tax bills as led to new government Google Tax

Tax row: Amazon's tax bill has come under scrutiny

Amazon has stepped into another tax row, as it was revealed that the group's UK business paid £11.9million in tax on £5.3billion worth of sales to British shoppers.

The online retailing giant recorded sales up 14 per cent last year, according to Companies House filings.

But the group's Amazon.co.uk subsidiary reported a profit of just £34.4million and thus incurred a tax bill of £11.9million.

The news will fan the flames of the argument over internet giants' tax bills, with firms such as Amazon and Google attacked for booking profits in lower tax countries.

Amazon employs more than 7,700 people in the UK and its sales in the country account for 9.4 per cent of its global turnover.

But sales in Britain are taken through the group's Luxembourg arm, called Amazon EU Sarl.

The Luxembourg business is where sales from many countries in Europe are booked and are not taxed in the country where the shopper carried out the transaction.

Amazon has come under increasing pressure for the practice and said last month it had begun booking UK sales in this country, which may see it pay more tax.

Jonathan Isaby, chief executive of the TaxPayers' Alliance, said: 'You can understand people's anger at organisations like Amazon perceived not to be paying their fair share, but our frustration should be focused at the politicians and bureaucrats who have created our ludicrously complicated tax code.

'It is so riddled with loopholes and exemptions that those who can afford to find them will be able to. It's time for a radical simplification of the tax code to make it easier to administer, to make the line between 'avoidance' and 'evasion' more obvious, and with fairer and lower taxes across the board.'

In April Chancellor George Osborne said firms that move their profits overseas to avoid tax will be subject to a 'diverted profits tax'.

The so-called 'Google Tax' is designed to discourage large companies from diverting profits out of the UK to avoid tax.

Firms such as Apple, Google and Starbucks have all seen their European tax payments criticised for being too low.

Osborne said he would close tax loopholes that enabled businesses to take account of foreign branches when reclaiming VAT on their overheads.

Crackdown: George Osborne will bring in a measure dubbed the Google Tax

Osborne said the new tax measures were expected to raise £3.1 billion over the next five years.

In October, the European Commission said it would launch a probe to see whether Amazon's tax affairs complied with state aid rules.

The EC said it would look at a 2003 tax agreement between Luxembourg and the retailer because it said most of Amazon's European profits are recorded in Luxembourg, but are not fully taxed in the state.

This investigation follows other probes the EC has launched into the tax affairs of computer giant Apple, coffee chain Starbucks, and the financial arm of car maker Fiat.

Labour MP Nick Smith, a member of the Public Accounts Committee during the last parliament when it investigated tax avoidance, said the Government must crackdown on the problem.

He said: 'It's just not good enough. George Osborne needs to pull his socks up and get to grips with this.

'Amazon has to pay its fair share. Of course it's complicated but Osborne needs to get his best Treasury geeks to do a job of work on Amazon.

'This issue isn't going away. MPs of all parties want global companies to be doing the right thing.