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Eric Schmidt defends Google's UK tax tactics

Eric Schmidt defends Google's UK tax tactics

Eric Schmidt has come out in defence of Google's 'immoral' tax avoidance policy.

Google executive chairman Eric Schmidt has come out in defence of the company's tax avoidance tactics here in the UK.

Responding to the recent controversy over news that the company had paid a mere £6m in tax during 2011, despite bringing in revenue of £395m, Schmidt argued that Google was actually doing a great deal of good for the UK economy.

"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," he said speaking to the BBC's World at One show.

He also defended the company's tactics on the grounds that it was simply doing what all international companies do.

"The same is true for British firms operating in the US, for example"

"I think the most important thing to say about our taxes is that we fully comply with the law and we'll obviously, should the law change, we'll comply with that as well."

Google manages to pay such a low tax rate because it puts all of its UK revenue through its European base in Ireland, which has a corporation tax of only 12.5 per cent. It then goes via the tax haven Bermuda on its way back to the US. By doing this the company is only paying tax on the 10 per cent commission paid by the Irish part of the company to the UK arm. This tactic is entirely legal and commonplace among multinational companies.

However, Google was among a number of companies whose tax avoidance tactics were branded as 'immoral' last year by a committee of MPs. Clearly Schmidt doesn't see things this way.

What do you think? Should Google be a little less smart with its tax affairs or is it down to the government to change the rules?

37 Comments

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MrJay 22nd April 2013, 16:04 Quote
I do a 'great deal of good' for the Students and Staff i support, should i get a tax break?

If you as an individual where do pull the same **** you would be imprisoned.
Snips 22nd April 2013, 16:08 Quote
All this from the whiter than white Google?

Cannot play the high moral ground now, pay up like the rest of us. They've been caught out and this is the piss poor excuse they give us?
runadumb 22nd April 2013, 16:48 Quote
Hey if you can get away with it you'd be a god damn fool not doing it.

'Immoral' or not the Government can go jump!
Lenderz 22nd April 2013, 17:20 Quote
Their responsibility is to shareholders, not society.

This is the society we have built, either we change that or we cannot really complain with any real reason. If they can do it and its legal good for them.
meandmymouth 22nd April 2013, 18:06 Quote
Google and others shouldn't have to defend themselves when doing something completely legal. It is the MP's that should be the ones defending themselves for leaving open these legal loopholes that allow corporations such as Google to avoid paying tax whilst happily forcing disabled and dying people to find work. I can't imagine there isn't a single MP that isn't being hypocritical when calling someone else's behavior 'immoral'.
megamale 22nd April 2013, 18:58 Quote
Quote:
Originally Posted by meandmymouth
Google and others shouldn't have to defend themselves when doing something completely legal. It is the MP's that should be the ones defending themselves for leaving open these legal loopholes that allow corporations such as Google to avoid paying tax whilst happily forcing disabled and dying people to find work. I can't imagine there isn't a single MP that isn't being hypocritical when calling someone else's behavior 'immoral'.

This....

Avoiding taxes is not illegal, nor immoral. Evading taxes is. Every business, and every person tries to minimise their tax bill. Not doing so is the exact equivalent of "donating" money to the government. Does anyone do that? Ever?

If you want them to pay more taxes fix the tax loopholes.

Businesses, the very vast majority of them, are a good thing. The benefits go far beyond the taxes they pay, it's about the people they employ, they save money by making things more efficient, and the salaries paid and money saved goes to be spent on other services and so forth.
Snips 22nd April 2013, 19:09 Quote
So the nearly £400 million (which was 2011 figures and recent are probably more) it made on our shores, you are happy that only £6 million went on taxes in this country?

Good luck defending that one guys.
XXAOSICXX 22nd April 2013, 20:16 Quote
Quote:
Originally Posted by Snips
So the nearly £400 million (which was 2011 figures and recent are probably more) it made on our shores, you are happy that only £6 million went on taxes in this country?

Good luck defending that one guys.

What's to defend? They've done nothing wrong...and an MP calling anybody immoral is practically a compliment.

I'm quite happy that - as a business - they've EARNED that much money and have paid so little back in. When the law changes, I'm sure they'll change their tactics, but until then, full credit to them for doing the best for their shareholders.
Snips 22nd April 2013, 20:34 Quote
Regulate them out of the country and seize their UK assets now, the only way to be sure :)

OK I'll bank that and come back to haunt you when the game developers tax breaks gets panned again or ARM hold their hands up and give in as they can't compete due to tax liabilities that the foreign competition don't have.
schmidtbag 22nd April 2013, 20:36 Quote
I personally agree with Eric Schmidt (I have no relation to him, that I'm aware of anyway). Google's services are a privilege for many companies and most of those services are free, or in fact, give people money. While I'm not familiar with British politics, I'm assuming there is just as much tax corruption and misspending going on in the UK as there are in countries like the US.

Google's services probably do more for the people of the UK than the additional tax money they "should" be pitching in.
djzic 22nd April 2013, 20:59 Quote
The way I see it, the less tax Google must give away, the more money they can inject into projects that are beneficial to the economy, not detrimental...

An MP calling tax evasion 'immoral' is so hypocritical that it cannot be explained.
r3loaded 22nd April 2013, 21:17 Quote
Quote:
Originally Posted by meandmymouth
Google and others shouldn't have to defend themselves when doing something completely legal. It is the MP's that should be the ones defending themselves for leaving open these legal loopholes that allow corporations such as Google to avoid paying tax whilst happily forcing disabled and dying people to find work. I can't imagine there isn't a single MP that isn't being hypocritical when calling someone else's behavior 'immoral'.
Precisely! Why should Google (or anyone else for that matter) pay more tax than they're supposed to by law? Yes, it's shady but MPs are responsible for ensuring loopholes are closed up.
SexyHyde 22nd April 2013, 23:57 Quote
Am I happy that Google paid so little in taxes? No
Do I think Google are to blame and should change something? No
It's about time the vast majority of people discovered the difference between Capitalism and Socialism, look at the whole picture and not regurgitate someones soundbite opinion which more often than not has some ulterior motive.
If anything is immoral about this tax saga, it's the politicians saying "it's not right, something must be done!" and then not doing anything about it.
Lazarus Dark 23rd April 2013, 00:10 Quote
I do everything possible to lower my tax bill. Everyone does. Why wouldn't a corporation?
Its not immoral to only pay the taxes you have to. Otherwise you're giving away money unnecessarily.
As long as Google is fully legal, its up to the government to write the laws that determine how much they have to pay. All these MP's are doing is admitting that they are bad at writing tax laws.
WarrenJ 23rd April 2013, 08:58 Quote
If i was google I would be doing it. To be honest, Google has been singled out because it is a common place name. If Uberderk Auto International was found out doing it, noone would care and carry on with their business.
Snips 23rd April 2013, 09:19 Quote
No they've been singled out because they've contributed so little to the UK economy yet taken so much!
Lance 23rd April 2013, 10:21 Quote
Quote:
Originally Posted by Snips
No they've been singled out because they've contributed so little to the UK economy yet taken so much!

Taken what? Money out of society? They contribute so much more than that, they're job creators and they're spenders, money is a cyclical item.

There is only one factor that actually matters here:

TAX LAW -

Anything else is irrelevant, tax and accounting standards have always been a catch-up game between regulation and clever tax accountants. Each year these get tightened to prevent companies taking the piss, and maybe this year they will be able to get a hold of a bit more of Googles taxes paid.

Oh and the British economy is basically founded on people like that these days, international businesses bring in their head offices for Europe here because it makes sense, but they would leave if we became as tax heavy as places like Sweden, so the politicians are scared to hit down too hard.

What they did to google is immoral and unfair but that doesn't matter to them because as we've seen from the expenses scandal, and the **** they throw at each other before elections, they are all immoral anyway.

I do have one little question though:

Why does the UK deserve a larger chunk of the money that an American company has earned? What did the UK do do earn it?
Snips 23rd April 2013, 11:22 Quote
They made those profits in the UK. Weren't asking for taxes on worldwide profits, just from profits made in this country.
AlphaAngel 23rd April 2013, 13:51 Quote
Everyone saying that a corporation should do everything it can to lower its tax bill are right, they should - but should this be allowed to included buying the government which is in place to serve the public interest? I think this crosses the line personally. Corporations legally bribe governments (through political donations and job offers to ministers when they retire) to create loopholes in law to exploit, it is this issue that needs to be tackled first.

Also, is it just me, but when anyone says that they are empowering people, I really think they mean passing the responsibility.
XXAOSICXX 23rd April 2013, 13:56 Quote
Quote:
Originally Posted by Snips
No they've been singled out because they've contributed so little to the UK economy yet taken so much!

By providing jobs, enabling growth, providing free services which many of us depend on and by fuelling the technology sector which in turn creates more jobs.

What have they taken, exactly? Public money?
Snips 23rd April 2013, 14:37 Quote
Jobs? enabling growth? Free services?

Show what that £6 million in taxes has done in the above?
patrickk84 23rd April 2013, 14:49 Quote
Quote:
Originally Posted by Snips
Jobs? enabling growth? Free services?

Show what that £6 million in taxes has done in the above?

You can't be serious...
XXAOSICXX 23rd April 2013, 15:53 Quote
Quote:
Originally Posted by Snips
Jobs? enabling growth? Free services?

Show what that £6 million in taxes has done in the above?

Eh?
SexyHyde 23rd April 2013, 17:23 Quote
@Snips you do realise there are UK companies that made a lot more money than Google from their UK operations and paid a lot less tax.
You need to direct your ire at the people that allow this to happen. Or the system itself that pretty much requires it.
Its like being kicked in the head and being angry at the shoe, rather than the person wearing it.
XXAOSICXX 24th April 2013, 10:26 Quote
Quote:
Originally Posted by SexyHyde

Its like being kicked in the head and being angry at the shoe, rather than the person wearing it.

Lol :)
Snips 24th April 2013, 20:42 Quote
Not really and no response then?
SexyHyde 25th April 2013, 01:27 Quote
Quote:
Originally Posted by Snips
Jobs? enabling growth? Free services?

Show what that £6 million in taxes has done in the above?

OK. You cant show how specific collected taxes have done anything, as it goes into one big pot and then spread out, Politicians decide how taxes are spent - Just as they are in charge of the rules that are used to collect taxes. And the loopholes to avoid tax, that is right, the politicians put them there.

With Google paying less taxes that would have given them more money to
1) employ people (jobs).
2) spend on R&D (enabling growth)
3) operate free services
Snips 25th April 2013, 08:55 Quote
1) A drop in the ocean for such a high turnover
2) Hardly any R & D occurs in the UK if any
3) at the price of adware at best
Lance 25th April 2013, 09:04 Quote
It seems that you have made up your mind snips.

Unfortunately this argument is quite an old one, essentially it's capitalism vs socialism.
Lenderz 25th April 2013, 09:52 Quote
Quote:
Originally Posted by Snips
1) A drop in the ocean for such a high turnover
2) Hardly any R & D occurs in the UK if any
3) at the price of adware at best

Pretty much an analogy to all the posts you've made.

But I drive, but I don't pay any road tax, is this immoral?

I drive a Toyota Prius, one of my reasons for getting it was as a premium car it has a low TCO, zero road tax and low fuel consumption.

My avoidance of paying road tax is perfectly legal and actively encouraged by central government to sell more low emission vehicles, I'm actively reducing the amount of taxes I pay both in fuel duty and road tax, as is my right.

This is essentially what google is doing using perfectly legal tax reduction methods, as their number one priority is providing value for money to their share holders, and mine is reducing my none essential outgoings so I can spend that money in different areas. So long as no laws are broken I see it as government encouraging this activity in order to make the UK an attractive place to do business and employ people, who then pay taxes through their earnings and VAT on their spending.

It's not as clear cut as you make it seem.


Sent from my iPhone using Tapatalk
Snips 25th April 2013, 19:28 Quote
Quote:
Originally Posted by Lenderz
Pretty much an analogy to all the posts you've made.

But I drive, but I don't pay any road tax, is this immoral?

I drive a Toyota Prius, one of my reasons for getting it was as a premium car it has a low TCO, zero road tax and low fuel consumption.

My avoidance of paying road tax is perfectly legal and actively encouraged by central government to sell more low emission vehicles, I'm actively reducing the amount of taxes I pay both in fuel duty and road tax, as is my right.

This is essentially what google is doing using perfectly legal tax reduction methods, as their number one priority is providing value for money to their share holders, and mine is reducing my none essential outgoings so I can spend that money in different areas. So long as no laws are broken I see it as government encouraging this activity in order to make the UK an attractive place to do business and employ people, who then pay taxes through their earnings and VAT on their spending.

It's not as clear cut as you make it seem.


Sent from my iPhone using Tapatalk

but your analogy is also a little different. It's like you buying a Prius but instead of paying the dealer in this country, you've paid the man in Luxembourg, who then processes the payment through the Cayman Islands and then gives instruction to ship your car from Ireland. You woke up one morning and it's sat on your drive. Now who gets the tax from the transaction even though you are in the UK, dealt with the salesman in the UK and it showed up on your drive in the UK?

That's my point, they made the £400 million profit IN the UK but have filtered it down to nothing.
Lenderz 26th April 2013, 09:59 Quote
Quote:
Originally Posted by Snips
but your analogy is also a little different. It's like you buying a Prius but instead of paying the dealer in this country, you've paid the man in Luxembourg, who then processes the payment through the Cayman Islands and then gives instruction to ship your car from Ireland. You woke up one morning and it's sat on your drive. Now who gets the tax from the transaction even though you are in the UK, dealt with the salesman in the UK and it showed up on your drive in the UK?

That's my point, they made the £400 million profit IN the UK but have filtered it down to nothing.

I can see what you mean, really I can but again, if jumping through these loopholes is legal why shouldn't they? My point was I don't have to pay road tax so I don't, they don't have to pay corporation tax at the full intended rate, so why should they? There might be some hoops to jump through but both things are completely legal.

It's not immoral or illegal to avoid paying taxes so long as no laws are broken. It is up to the government to tighten and close loopholes if they shouldn't exist, otherwise it just appears to be an incentive to do business in that manner.

Tax shouldn't be optional, either the loopholes are intended to be jumped through or they should be closed nobody should expect google to pay more tax because it feels good to do so.


Sent from my iPhone using Tapatalk
Snips 26th April 2013, 12:35 Quote
Are these tax loopholes accessible to you or I?

To most of us, No unless you have a sizeable wealth and can afford the tax lawyer's and accountants bills.

I'm sure if I told HMRC that I'm only going to pay 1.5% tax on my income for the next year, I'm not sure they would be too happy with that.

Nothing anyone has said here has convinced me it's right and moral for Goggle to do this.
Lance 26th April 2013, 13:13 Quote
But if you were to do "it" without researching the the laws on your own then it wouldn't be worth the time that the accountants will need to put in because you don't pay enough tax for it to be worth it.

If you're willing to do it on your own then you can go onto the HMRC website and research the rules and allowances yes they are accessable to you, you can ofset your costs of business taxes or personal taxes, you just need to compete your own tax return.

Remember that google are only reducing the tax that they are paying in the UK, they will then be paying more tax in the USA on top of that.

I don't understand where you get this right and moral obligation to pay taxes, these tax incentives are put in place to help businesses as well as keep the UK marketable, and these are many different options in terms of incentives that they offer different people to lower their taxes.

Also, don't forget that this is 1.5% of their revenue, not their PBIT.
impar 26th April 2013, 13:28 Quote
Greetings!
Quote:
Originally Posted by Snips
Are these tax loopholes accessible to you or I?
Of couse not. You need to be rich to avoid taxes.
And only being rich is it seen as tolerable from the society to avoid taxes.
Two entirely different measures.
Lance 26th April 2013, 14:21 Quote
But you're talking about completely stupid figures.

If someone paying £3000 taxes a year with 1 revenue stream avoided taxes they'd be saving maybe 2-3 hundred pounds, if they were clever and worked out all the numbers correctly.

For a high net worth individual (HNI) you have 10-20 revenue steams of varying sizes and profitabilities, with varying costs associated with it. You also have 1 or more accountants who are managing this money who's job it is to calculate this and make sure that you maximise your expenditure's efficiency.

If a HNI earns £1,000,000 then he'll get taxed 50% of whatever is "profit" but at that level your taxes aren't as easy as PAYE. There will be costs associated with that, and those that are business costs, such as the accountants, their offices and your business travel to and from business meetings not at their offices, can be claimed back against your taxes. Just like you expense your (non standard) travel against the business, and the business claims then against their profits. So after those expenses the HNI will need to pay tax on say, £500,000.

Of that the first £8000 is tax free same as me and you, then its 20% up to £34,000, 40% up to £150,000 and after that the rest will be at 50%, so thats 50% of £350,000. That works out at around £226,000 tax, which of the revenue is only 20%. But he's also spend 500,000 in earning that money, so in effect hes spent £726,000 of his income, which is 72% of his income going back into society, through one means or another.

Its not like they're taking anything you can't, its just the scales are different. You can do all of this if you become self employed but its just not worth it with low numbers.
SexyHyde 27th April 2013, 11:05 Quote
The other reason the politicians don't want to close the loopholes and are trying to ban accountants from hmrc is because a lot of mp's have jobs as executives at companies which most earn circa £100,000 for about 2 days a year, most of these are just positions where they disclose the latest tax loopholes.
I'm all for a universal tax. and agree that this situation is immoral, but it's the politician's that are being immoral. and they are spinning it to try to get big companies to pay more but still have the loopholes to 'sell' to companies. The politicians only think tax avoidance is immoral if they aren't getting paid.
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