Google boss defends British tax affairs

Google boss defends British tax affairs

Summary: Google's executive chairman Eric Schmidt has defended the US internet giant's tax arrangements after claims that it has unethically dodged paying vast amounts of British tax.

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Writing in Britain's Observer newspaper, Schmidt insisted that Google "has always aspired to do the right thing", and that the company pays "significant" amounts of British corporate, local, and employment tax.

But he added: "International tax law could almost certainly benefit from reform."

Margaret Hodge, chairwoman of the British parliament's influential Public Accounts Committee, last week described Google as "evil" as she grilled its vice president Matt Brittin.

Google generates around £3.2 billion (AU$5.01 billion) in Britain every year, but paid only £6 million in British corporation tax in 2011.

The online search giant routes all of its European advertising sales through its offices in Ireland, where businesses enjoy relatively low tax.

"When a company only operates in one country, it's obvious where its profits are generated, and thus where its taxes should be paid," Schmidt wrote. "But for multinational companies with a global presence, it's much more complicated. To pay the right amount in taxation, you need to determine where the profit is actually created."

But a former Google executive who gave evidence to Hodge's committee told The Sunday Times newspaper that the company was operating an "immoral" tax avoidance scheme.

"The real victims are ordinary taxpayers in Britain who are being cheated by Google," Barney Jones told the broadsheet.

Schmidt said corporate tax is "rightly a hot topic" at a time of economic hardship, but insisted that tax rules are set by politicians and it is up to them, not companies, to reform them.

"The UK government has the perfect opportunity to take the lead in shaping this complex debate at the G8 summit next month," he wrote.

Leaders of the world's eight biggest economies are due to meet in Northern Ireland on June 17 to June 18.

Schmidt is due to meet with UK Prime Minister David Cameron on Monday at a gathering of the prime minister's business advisory group.

A Downing Street source said that tax would be up for discussion at the meeting.

"Tax will be discussed as part of a wider discussion on the economy and the G8 agenda," said the source.

"Nothing is off the table."

Topics: Google, Government UK

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3 comments
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  • Yes, Google is evil ....

    ... but Google is not the one who created the loopholes. They are just taking advantage of them ... just like everybody else.

    Just because a player takes advantage of the rules of the game and finds a way to win with them does not mean that the player cheated.

    Don't like companies like Google taking advantage of loopholes?? Then close them. But you won't see that happening ... because they are the same loopholes the politicians are using to avoid paying taxes themselves.
    wackoae
  • Google is good -

    Google are paying full tax under EU rules, they are not doing anything outside the law. Our trusted politicians signed up to these laws and now they complain when people operate under the same laws, similar to the ECHR situation.
    Hodge is evil, her family company turned over £2Billion in the UK last year, and paid only £163k in tax - why is that not highlighted by the media??
    lojolon
  • A complex issue

    Some kind of worldwide agreement would be ideal but those countries with lower tax regimes would be anxious not to have change as this generates business and income for them - agreement is therefore unlikely.

    I think the only answer I can see is to determine payment on the basis of the country the income is from rather than where it is paid. This too would present problems because companies trading say from the US but selling some services direct to us from the US would become liable for UK taxation - however it is unlikely the US would drop the revenue it expects from them so they would face double taxation.
    However where a company, like amazon and possibly google, just moves a part of its administration to a low tax country but the transaction takes place in the UK then I think they have a moral obligation at least, to pay UK taxation. Moving the payment collection and ordering to ireland should not make it an IRISH company. If the people engaged in the transaction are in the UK then the position is clear.

    The morality is simple - if you make money in a country you should willingly contribute to the good of that country. There are loopholes but that does not make using them "morally" right and we need much more morality in business.

    Is google evil? Hell yes but for a multipliciy of reasons, not just this. Any company making excessively large profits could sell for less - simply maximising profits for no reason other than greed has to be immoral.
    cymru999