What a load of Schmidt: Google Chairman defends UK tax avoidance

Eric Schmidt, the executive chairman of Google, has come out in defence of Google's tax avoidance practises in the U.K. Members of Parliament have already denounced multi-national firms who pay little amounts of tax as "immoral," but Schmidt seems to be okay with the practise. 

Speaking to the BBC, Schmidt admitted that the U.K is a "very good market for [Google]," bringing in over £395 million ($602 million) in 2011. On that £395 million, Google paid just £6 million in tax, an effective rate of 1.5% (the current corporate tax rate is 21%).

Schmidt claimed that "investing heavily" in U.K business was equivalent to paying the full and proper amount of tax, saying:

"We empower literally billions of pounds of start-ups through our advertising network and so forth. And we're a key part of the electronic commerce expansion of Britain, which is driving a lot of economic growth for the country."

While Google do provide their AdSense and AdWords services in the U.K, most of that profit still goes to Google. 

Google isn't alone in avoiding tax, however. Facebook made over $1 billion in profit during 2012 and paid no tax - in fact, they got a $430 million refund. Meanwhile, Microsoft could owe the Danish government around $1 billion, and has been caught avoiding tax in the U.K. Schmidt claims that U.K firms pay little to no tax in the U.S, which is true. Google does comply with the law, but the morality of avoiding tax is questionable. 

Chancellor George Osborne, along with his counterparts in France and Germany, have called for an end to "profit shifting," where large companies shift profits to Ireland, where corporation tax is far lower. 

Source: BBC | Image via LinkedWire 

Report a problem with article
Previous Story

Leaked iPad 5 rear panel confirms iPad mini-like design?

Next Story

Take a picture by winking at Google Glass

33 Comments

Commenting is disabled on this article.

AKA globalization == the worst! One country seems to be doing particularly well, while everyone else is having their culture and jobs removed.

There's really nothing wrong with what these companies are doing. It's completely legal and absolutely makes sense from a business perspective. George ought to consider that perhaps the best way to avoid "profit shifting" would be to lower our corporation tax to a level where companies would "profit shift" to the UK!

Most of the defences here are that other companies are doing the same. So what? That doesn't make it right.
If Google (/Microsoft/Apple/whoever else) are making money in the UK (or any country for that matter), they should be paying the same rate of tax on it as any other business. Taxes like that hit small companies more and they still pay the full amount. Annoys me that bigger companies always try and get away with it.

If people don't like it, then vote for politicians willing to do something about it beyond mere words. But the fact remains that unless there's concerted global change organisations will adapt to the most tax efficient setup.

Sorry to break this to you but ALL politicians are full of hot air and broken promises, so no matter who people vote for it doesn't change a single thing!!!

thommcg said,
If people don't like it, then vote for politicians willing to do something about it beyond mere words. But the fact remains that unless there's concerted global change organisations will adapt to the most tax efficient setup.

Sorry to break this to you but ALL politicians are full of hot air and broken promises, so no matter who people vote for it doesn't change a single thing!!!

Crisp said,
As an apology, Google should give us fibre

They have been buying up unused bits of cable in the UK for some time so it's going to arrive eventually.

Drewidian said,
Anyone who takes a blatant motto like "Do no Evil", I expect the worst. Maybe not today, or tomorrow, but eventually.
'do no evil' is worlds apart from 'only do good'. there's nothing inherently bad about tax avoidance, it's just not a good thing to partake in.

if companies pay tax properly in E.U, the E.U might do favor to that companies, like Sony for example.
Sony doesn't dodge the tax, and Germany agrees to Sony demands to confiscates the PS3-dongle & fines whoever insisting keeping the dongle.

You point out that Google, Facebook, and Microsoft are trying to avoid paying taxes. Where is the data about Apple doing the same? Last year Apple sold over £6bn in the U.K., and yet only paid £10 million in taxes. You were upset with Google paying an effective rate of 1.5%, but Apple's payment to the U.K. government was 0.17%.

http://www.dailymail.co.uk/new...e-6bn-UK--paid-10m-tax.html

I am happy to see companies pay less in taxes, but criticize all of them if you are criticizing any of them, even if you are a devotee of one of those companies.

maxslaterrobins said,
It wasn't deliberate.

I don't think it was (truly, I don't think it was), however you would think to lookup your favorite when doing a story like this to check to see if they are not doing the same.

hard to stop because
e.g. google uk can buy £300million worth of services from google france and have this in their books thus making far less profit

hence why companies have registered arms in overseas tax havens

Milan - said,
hard to stop because
e.g. google uk can buy £300million worth of services from google france and have this in their books thus making far less profit

hence why companies have registered arms in overseas tax havens

Given that Frances is even less business friendly than the UK is that wouldn't help XD But I get the idea, with a different country being used.

Milan - said,
hard to stop because
e.g. google uk can buy £300million worth of services from google france and have this in their books thus making far less profit

hence why companies have registered arms in overseas tax havens


AFAIK its Google Ireland and Google Netherlands that are used for avoiding taxes in Europe.

meh, if there's going to be a loophole, someone's bound to take advantage of it. basic principle of any business - maximize profit. if they want the firms to pay more tax, close the loophole.

Arpit said,
meh, if there's going to be a loophole, someone's bound to take advantage of it. basic principle of any business - maximize profit. if they want the firms to pay more tax, close the loophole.

True. It's not entirely that though to be honest. These countries complain that they want these jobs and that they don't want these companies to take jobs overseas, but at the same time, they certainly don't treat them like they want them there, or like the governments even understand or appreciate that these companies are in fact creating these jobs...

Ignoring for a moment that all corporate taxes do is get carried on to the consumer anyway, I really wish that countries would realize that they really don't benefit from taxing business so heavily. If they did not, companies would be relocating to and creating jobs in their countries...

maxslaterrobins said,
Closing the loophole is difficult because companies can freely move profit from one place to another to appear unprofitable. Facebook does it a lot.

We need to tax IP licensing to the difference of the tax here and the tax there. That way, there would be no benefit to the arrangement.

M_Lyons10 said,

True. It's not entirely that though to be honest. These countries complain that they want these jobs and that they don't want these companies to take jobs overseas, but at the same time, they certainly don't treat them like they want them there, or like the governments even understand or appreciate that these companies are in fact creating these jobs...

Ignoring for a moment that all corporate taxes do is get carried on to the consumer anyway, I really wish that countries would realize that they really don't benefit from taxing business so heavily. If they did not, companies would be relocating to and creating jobs in their countries...


My country has these loopholes, also called mailbox companies, as they basically only own a mailbox address here. Companies that come from other countries to avoid taxes give us a nice extra penny. several billions a year

Arpit said,
meh, if there's going to be a loophole, someone's bound to take advantage of it. basic principle of any business - maximize profit. if they want the firms to pay more tax, close the loophole.
Sounds right to me, Schmidt was just telling it like it is.