Google's Schmidt 'very proud' of tax avoidance scheme

Google's Schmidt 'very proud' of tax avoidance scheme

Summary: The company's chairman has defended the complex arrangement that sees its UK profits largely funnelled to Bermuda, via Ireland and the Netherlands. 'It's called capitalism,' he said in an interview on Wednesday.

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Google chairman Eric Schmidt has said he is proud of the company's tax structure, which has been heavily criticised by lawmakers around the world.

Eric Schmidt
Eric Schmidt has defended Google's tax arrangements in the UK. Image: Stefanie Olsen/CNET News

Google paid the UK tax authorities £6m for 2011 despite turning over £395m, in an arrangement that involves sending its proceeds to a Bermuda shell company via Ireland and the Netherlands. The firm was, alongside Amazon and Starbucks, one of the corporations that came in for a grilling by UK MPs last month over the issue of tax avoidance. A parliamentary committee subsequently described the complex avoidance schemes as "utterly immoral".

In an interview reported by Bloomberg on Wednesday, Schmidt said the company was simply engaged in "capitalism".

"I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate," Schmidt said. "It's called capitalism. We are proudly capitalistic. I'm not confused about this."

The Independent also reported Schmidt as saying the company was only paying the British taxman what it had to.

"To go back to shareholders and say, 'We looked at 200 countries but felt sorry for those British people so we want to [pay them more]', there is probably some law against doing that," he was quoted as saying.

The newspaper also quoted a response from Margaret Hodge, the MP who chaired the Public Account Committee that had criticised Google.

"For Eric Schmidt to say that he is 'proud' of his company's approach to paying tax is arrogant, out of touch and an insult to his customers here in the UK," Hodge said. "Ordinary people who pay their taxes unquestioningly are sick and tired of seeing hugely profitable global companies like Google use every trick in the book to get out of contributing their fair share."

Google has its international headquarters in Dublin, largely because the Irish government offers generous tax breaks. This means that Google's UK proceeds go to Ireland, along with most of the profits it makes in other countries outside the US. However, in a complex process that is nominally based on intellectual property licensing, much of that cash then goes through a Dutch holding company to a Bermuda holding company, which supposedly protects Google's intellectual property.

As the Public Accounts Committee noted in its report, all Google's non-US-derived profits go to Bermuda, so the company "may be depriving the USA of legitimate tax revenue as well as the UK".

While testifying to the committee, Google's vice president for Northern and Central Europe, Matt Brittin, justified Google's low corporation tax payments in the UK by saying that "all of the engineering work is done in California".

This came as a surprise to Google's London office, which — according to the firm's own website — is "one of Google's largest engineering operations in Europe", having been instrumental in developing "Voice Search, Local Search, Maps, TV, YouTube and core infrastructure".

Topics: Google, United Kingdom

David Meyer

About David Meyer

David Meyer is a freelance technology journalist. He fell into journalism when he realised his musical career wouldn't pay the bills. David's main focus is on communications, as well as internet technologies, regulation and mobile devices.

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98 comments
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  • No, it's called tax evasion

    And I wouldn't be surprised if the authorities are knocking on his door with an arrest warrant quite soon.
    Lerianis10
    • Not when done by Corporations

      When done by people like us it's tax evasion. When done by corporations it's called capitalism. Nobody from any corporation has ever gone to prison on tax evasion.
      mm71
      • Why should Google give money out to those who have not worked?

        Shouldn't you deserve to keep what you earn?
        LBiege
        • It's called taxes, idiot!

          It's called taxes, idiot!
          oops77541
          • Robbery is better?

            This is why those who don't pay tax should have never been allowed to vote.
            LBiege
          • Really?

            Poll taxes are unconstitutional. After passage of the Fifteenth Amendment, they were routinely used, along with literacy tests, in states with Jim Crow laws to disenfranchise voters, such as poor whites, ethnic natives and blacks, before passage of the Twenty-fourth Amendment. Any requirement for tax payment, fees or tests in order to vote is unconstitutional.

            What you suggest is not only illegal and unconstitutional, but also immoral. Next thing you are going to tell us that some people's votes should count more than mine because they paid more taxes than me.

            Despite Republicans vastly outspending Democrats, cynical gerrymandering and attempts to disenfranchise voters in states with Republican control, The Democratic party still holds the presidency, improved their majority in the Senate and gained seats in the House. Apparently what you find galling is that a majority of people voted for their self-interests rather than the interest of those that spent so much to try to get them to vote for theirs.
            djchandler
          • Comparing Apples and Oranges.

            Using a tax to prevent someone from voting and stating that a person should not vote unless they share the burden of taxation are two completely different things. There was a reason the founding fathers restricted the vote to male landholders initially, and it wasn't racism or plutocracy. It was an attempt to make sure that voters were inured against governmental bribery for their vote as much as possible.
            baggins_z
          • But, hey, tell you what

            we can do it this way. Everyone gets a single vote by default. Then you gain an additional vote for each percent of your income you pay in taxes. After all, since you are paying more for the government, you should have a correspondingly greater say in its operations.
            baggins_z
          • You're Proud of the last 4 years?

            They have doctors and medication for that. Make sure to see your family physician before Obamacare forces him to close his office.
            partman1969
          • You Mean 6 Years, Don't You

            Our economic problems started in 2007 and really went downhill in 2008. The stock market crashed two weeks before Obama became president. Look it up. The last 4 years has only been (slowly) on the way up.
            hforman9
          • Really?

            Poll taxes are unconstitutional. After passage of the Fifteenth Amendment, they were routinely used, along with literacy tests, in states with Jim Crow laws to disenfranchise voters, such as poor whites, ethnic natives and blacks, before passage of the Twenty-fourth Amendment. Any requirement for tax payment, fees or tests in order to vote is unconstitutional.

            What you suggest is not only illegal and unconstitutional, but also immoral. Next thing you are going to tell us that some people's votes should count more than mine because they paid more taxes than me.

            Despite Republicans vastly outspending Democrats, cynical gerrymandering and attempts to disenfranchise voters in states with Republican control, The Democratic party still holds the presidency, improved their majority in the Senate and gained seats in the House. Apparently what you find galling is that a majority of people voted for their self-interests rather than the interest of those that spent so much to try to get them to vote for theirs.
            djchandler
          • If

            If a person's livelihood depends upon government handouts, that person should NOT be allowed to vote. It's a conflict of interest. That person will vote for the candidate that offers the most "free" stuff. Never mind that we who work for a living are actually paying for that "free" stuff.
            benched42
          • At what point does a person give up their civil rights?

            Voting is part of that, just as freedom of speech is a civil right. Who would knowingly trade their civil rights, their citizenship, for anything? And would we deny civil rights to those wounded in service to their country just because they require the assistance promised to them when they enlisted (yet can take over three years to begin receiving)? Are veterans part of this group you regard as receiving "free" stuff?

            Do we curtail other civil rights too? Examples in history where civil rights, citizenship, were curtailed based upon any criteria seems to be something a fair and just society would want to avoid. Rome was a Republic too for a while, even though it tolerated slavery. Not everyone could be a citizen. Are you proposing citizenship tests based on some criteria?

            BTW, everybody pays taxes, even the most destitute. They at the very least pay sales taxes. And people receiving Social Security benefits are now paying Medicare taxes out of those benefits, whether they use Medicare or not.

            Furthermore, oil corporations making record profits quarter after quarter are getting tax subsidies. Should those receiving tax subsidies be allowed to lobby Congress? Should they be prohibited from making political contributions?

            I don't understand where this kind of thinking is coming from.
            djchandler
          • Oil corporations do not receive tax subsidies

            A company taking a legal deduction that allows it to keep more of the money it earns is not a subsidy. To maintain otherwise is to tacitly admit that all money belongs to the state and the state is morally justified to parse it out as it sees fit. I have no desire to live in such a society, and I would wager that if you actually sat and thought about it, you wouldn't want to either.

            Oh, and just FYI, oil company profits are the same as they have been for years: 3% to 5%
            baggins_z
          • The original framers of our government

            realized that "common man" would NOT be able to make intelligent choices, but instead would opt for what superficially seems to provide the most personal benefits. That is why we are not a democracy, but a republic. It is also why the electoral college was set up. So, leaving votes in the hands of incapable people may sound lib-nice on the surface, but in fact ends up hurting us all and NOT serving "for the greater good". Get a clue, DJ.....
            Willnott
          • I Think They Forgot

            I think they forgot that we even pay taxes on hand-outs. By the way, Social Security and Medicare are never hand-outs. We individually pay for those things out of our paychecks. Look at the pay stub.
            hforman9
          • "Jobless to be denied vote!"

            Fortunately that headline would likely sound the death-knell of any political party proposing it.

            Your comment implicitly assumes that everyone relying on benefits is only interested in what they can filch from the pockets of more upstanding citizens who have jobs. It is not only offensively patronising but comic stereotyping of the worst kind.

            There are currently many millions of people who are jobless because of the economic and financial collapse of the last few years, and millions more out of work as governments cut public service jobs. In your tidy, if unremittingly bleak, world none of these are now interested in electing governments that might actually work to stimulate economies. What they are, in fact, solely interested in is getting more and more of your tax money to fund a lifestyle of scrounging and watching daytime TV.

            We live in democracies. This means that people we don't like have the vote too, which means that parties we don't like might get elected to government. If you want to change our political infrastructures you'll need slightly more than "people on benefits just want more of my money, so they can't have the vote" as a political philosophy.
            mister_moon
          • India

            Since a large percentage of corporate employees are in India (U.S. employer) such as with H.P., Symantec and others, does that mean foreign nationals should be allowed to vote?
            hforman9
      • Nope. Even when done by people like us its called

        using the loopholes offered to us. It's all legal.

        The laws need to be changed so that corporations can't do that.
        William Farrel
        • Though the last 2 paragraphs do make it sound like Google

          is knowingly trying to cheat the system.

          "While testifying to the committee, Google's vice president for Northern and Central Europe, Matt Brittin, justified Google's low corporation tax payments in the UK by saying that "all of the engineering work is done in California".

          This came as a surprise to Google's London office, which — according to the firm's own website — is "one of Google's largest engineering operations in Europe", having been instrumental in developing "Voice Search, Local Search, Maps, TV, YouTube and core infrastructure".
          William Farrel