Amazon (AMZN) Wins Government Contracts Despite Critiques

Amazon Web Services (AWS) is a key contractor for many governments globally, Inc. (AMZN), despite being subjected to heightened political scrutiny across the globe, nonetheless has succeeded in winning a number of lucrative government contracts worldwide, mainly for its Amazon Web Services (AWS) cloud computing division. A recent report pegs the value of these multi-year contracts in the hundreds of billions of dollars.

Among the critiques leveled against Amazon in the United Kingdom is that the tech giant is skilled at tax avoidance in that country. Amazon counters that the calculations presented by its critics in the U.K. "are misleading and do not include the bulk of our business." The company adds, "Comparing a contract value over many years, to an incorrect corporation tax figure for a single year is highly misleading."

Key Takeaways

  • Amazon Web Services (AWS) has won large government contracts worldwide, despite growing political criticism.
  • Among these critiques is that Amazon is skilled at tax avoidance.
  • Amazon counters that these critiques are "highly misleading," comparing the full value of a multi-year contract to incorrect figures for a single year's taxes.
  • Amazon also asserts that AWS offers large cost savings to governments.

Some AWS Government Contracts

In 2020 and 2021, AWS won contracts with the U.K. government worth a total of 425 million British pounds sterling (GBP), or about $531 million at the current exchange rate as of May 24, 2022. According to a report, AWS provides services for the Home Office, Her Majesty's Revenue and Customs (HMRC), the Ministry of Defence, MI6, and MI5, including sensitive document storage.

A U.K. government spokesperson said: "Amazon Web Services is just one of the government's many cloud service providers, and our procurement decisions are always based on getting value for taxpayers and the best quality services." Amazon states that U.K. government departments using AWS were "enjoying cost savings of up to 60%."

In the United States, Amazon reportedly has signed a $10 billion contract with the National Security Agency (NSA). In Australia, the same report finds that AWS has won contracts worth 626 million Australian dollars (AUD), or about $444 million in U.S. dollars at the current exchange rate.

Battle of the Numbers

The report that criticizes Amazon for tax avoidance in the U.K. cites figures indicating that it paid just 22.3 million GBP to the U.K. government in 2020, or about $27.8 million. Amazon counters that its total tax contribution was tax actually was 1.55 billion GBP during 2020, equal to about $1.93 billion. Amazon's calculation includes both direct and indirect taxes. Among the direct taxes are employer's national insurance contributions, business rates, stamp duty, and corporation tax.

Article Sources
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  1. The Guardian. "Amazon Bags £425m in Work From UK Government as It Is Criticised Over Tax."

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