Google’s tax avoidance is called ‘capitalism’- says chairman Eric Schmidt.
Mr Schmidt’s comments risk inflaming the row over the amount of tax multinationals pay, after it emerged that Google funnelled £6.07 billion ($9.8 billion) of revenues from international subsidiaries into Bermuda last year in order to halve its tax bill.
However, Mr 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.”
Documents filed last month in the Netherlands show that Britain is Google’s second biggest market generating 11pc of its sales, or £2.56 billion last year.
But the company paid just £6 million in corporation tax. Overall, Google paid a rate of 3.2pc on its overseas earnings, despite generating most of its revenues in high tax jurdisdictions in Europe.
The company reportedly uses complex tax schemes called the Double Irish and Dutch Sandwich, which take large royalty payments from international subsidiaries and pay tax in low rate regimes.
By channelling its revenues through Bermuda, Google avoided £1.25 billion of global taxation levies last year.
The tax arrangements add fuel to accusations made by British MPs that Google and other firms including Starbucks and Amazon, have been “immorally” minimising its tax bills.
Matt Brittin, Google’s UK boss, said MPs were blaming companies for a system that they had designed. “Google plays by the rules set by politicians,” he said. “The only people who really have choices are politicians who set the tax rates.”
Last week, Starbucks caved into public pressure and promised to pay £20m to the Treasury over the next two years. However the trigger more criticism of “optional” tax payments.
Quite how Google can still claim to “do good” by redirection sales and profits from the UK- and impoverishing the NHS and schools in the process is open to question.