Marks & Spencer has come under fire from tax campaigners over the way it structures its online sales to Europe, which has drawn comparisons to Amazon.
The retailer, which has been expanding its online business across Europe with its new marksandspencer.eu site, has set up a company in Ireland to distribute the goods, according to The Guardian.
These goods are stocked in the UK but shipped to Ireland and charged to Marks & Spencer (Ireland) Limited. Ireland has the lowest corporation tax rates in Europe.
M&S’s UK branch is paid a wholesale price for the goods it ships, and this is subject to UK corporation tax.
Although this process, known as “transfer pricing”, is legal, it has come under fire from tax campaigners who object to internet giant Amazon using it.
However, M&S only uses it for sales outside of the UK.
M&S told the newspaper that Ireland was used to host the website as it was its largest international market and therefore the logical host for the EU site. It said: “We pay UK corporation tax on all profits generated by UK sales and comply with the tax laws of all jurisdictions in which we operate.
“Our European websites are owned by M&S Ireland. This is made clear to all customers shopping on our European websites. Ireland is our largest international online market, taking over 50% of our online European sales, which is why we structure our other European websites around it. It would not make good business sense for us to set up anew in every market we enter.
“These are not UK sales, these sites do not serve UK customers and there are no sales made in sterling. All tax is legally and fairly paid both in the UK and in Ireland.”
However tax campaigners disagree. “Given that Marks & Spencer portrays itself as a British institution, it is disgraceful that it is choosing to avoid paying tax in this country,” Suzy Blackwell of UK Uncut told the newspaper.
Meanwhile, M&S, which is expected to unveil a 7% drop in profits to £658m tomorrow, is also grappling with customer complaints after its contactless payment system took money from accounts without their permission.
Shoppers have said money has been debited when they intended to pay in other ways. The system is only supposed to take money when cards around two inches away from the terminal but two customers who contacted the BBC’s Money Box programme said the payments were taken when their cards were in purses which were held well away from the device.
Marks & Spencer claims to be “the UK’s leading contactless retailer” after this month rolling out the system to 644 UK shops following a 25-store trial in London last year.
Its system processes over 230,000 contactless transactions per week.