Google boss responds to UK tax avoidance: “It’s called capitalism”, says Schmidt

eric schimdt: “It’s called capitalism”.While Starbucks wilts under the pressure of protest and public boycotts Google is  showing no such qualms as its chairman, Eric Schmidt, says that he is “very proud” of the company’s tax structure and that efforts to lower its payments to governments like Britain are just “capitalism”.

It is an interesting communications approach to take. Brazen almost. It gives the impression that Google does not care what anyone thinks of it. As the Telegraph reports Schmidt’s certainly comments risk inflaming the row over the amount of tax multinationals pay, after it emerged that Google funnelled $9.8bn (£6.07bn) of revenues from international subsidiaries into Bermuda last year in order to halve its tax bill.

I’m just wondering where all the tactical ads are from Microsoft? If Bing can’t capitalise on this then it can’t capitalise on anything.

Schmidt defended the company’s legitimate tax arrangements. “We pay lots of taxes; we pay them in the legally prescribed ways,” he told Bloomberg. “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.”

“It’s called capitalism,” he said. “We are proudly capitalistic. I’m not confused about this.”

In Britain Vince Cable was unimpressed by Mr Schmidt’s views. The Business Secretary told The Daily Telegraph: “It may well be [capitalism] but it’s certainly not the job of governments to accommodate it,” the Telegraph reports.

Starbucks must be looking on wondering how Google is getting away with it as it loses marketshare to rival Costa following its Engskov, managing director of Starbucks UK, writing an open letter on tax and trust in an effort to quell consumer disquiet.

It seems initially at least that Google, Amazon for that matter have gotten away with it because they are online and can hide from public disapproval.

However, earlier this week Havas’ global chief executive David Jones says they will be next. He wrote on Brand Republic about “the age of damage” and how he thinks Starbucks got the tax issue wrong.

“I think Google and Amazon are next,” Jones said. “The only difference that Google and Amazon have is that they are (effectively) a monopoly, and secondly they do not have real world stores that you can go and boycott.”

During last month’s committee hearing, MPs rounded on Amazon’s representative saying they were left frustrated because he was “evasive and unprepared to answer legitimate questions”. The company, which has 15,000 staff in the UK paid just £1.8m in tax in 2011.

The MPs report also said Google accepted profits should be taxed in the countries where they are generated but accused the company of having “undermined its own argument” because it remits its non-US profits, including those from the UK, to Bermuda, which has a favourable tax regime.

Jones said: “The second these issues come up you need to react instantly, rather than thinking these issues are going to go away. I would have launched a review of the tax that we have paid over the past five years, I would have gone into negotiations with the tax authorities on how much they believe that we should have paid, and I would have been very transparent and candid throughout. And almost apologise.”

  • almostwitty

    I’m guessing that no major multi-national corporation is lily-white when it comes to paying tax in the UK, so Microsoft and others won’t want to make capital out of this for fear the financial reporters will find that they too are channeling money around the globe to take advantage of lower tax rates.

  • Fake

    If you could pay, say, 3% or you could pay 33%… What would you choose?

  • Drewman

    If the UK charged a flat rate of 10 or 15% across the board – both to individuals and companies, the government would collect more money in tax that it would know what to do with. Everybody is prepared to pay a reasonable amount, multinationals included. It’s just that the definition of reasonable to most people is different from the politicians’ definition.

    It seems pretty simple to me. Under-cut the “lower tax” regimes and attract all multinationals to HQ in Britain. Why is Amazon in Luxembourg? Because it has lower tax and according to EU law, you have to choose one EU member state to set up HQ in and pay taxes in. Amazon are complying with EU law. So the UK needs to attract them all here, and the only way to do that is through lower taxes. Squeeze the rich and they WILL leave, and that goes for companies too.

  • Honzad

    What nonsense this is – all it recommends is countries undercutting each other in order to pick up a few scraps of tax that MNC’s are willing to offer, leaving the ordinary people to pay for all the services that the corporations use through personal taxation, or collapsing infrastructures, healthcare, education, etc.

  • Alan

    What’s the difference in buying from a Company like Starbucks or Amazon who do not pay UK taxes and buying from a factory in China who does not pay UK taxes. To me its the same difference. People who actively criticize the actions of Starbucks and Amazon should take a look at the goods in their home. Anything imported, whether it be a sofa, a carpet or a cup of coffee from Starbucks results in the same thing. Money leaving this country which benefits foreign Companies and Governments and is detrimental to our own.

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