Eric Schmidt on Google’s UK tax practices: ‘What we’re doing is legal’

While Google’s tax contributions in the UK continue to be under scrutiny, the search giant’s executive chairman, Eric Schmidt recently quipped that he is “rather perplexed” by the debate. Despite questions surrounding ethics, Schmidt maintains that Google’s tax practices in the UK are lawful.

Schmidt was quoted on BBC Radio 4’s Start the Week as saying:

What we are doing is legal. I’m rather perplexed by this debate, which has been going in the UK for some time, because I view taxes as not optional. I view that you should pay the taxes that are legally required. It’s not a debate. You pay the taxes. If the British system changes the tax laws, then we will comply. If the taxes go up, we will pay more, if they go down, we will pay less. That is a political decision for the democracy that is the United Kingdom.

Google has raised the ire of the UK government in light of revelations that the world’s number one search company, which makes most of its revenue from ad sales, has coughed up only £10-million in UK corporate taxes between 2006 and 2011, on revenues of £11.9-billion.

While ad placements are sold to UK publishers, Google collects sales revenue elsewhere and is therefore not taxed according to UK tax laws. Google has a very efficient tax structure. The search provider’s sales are routed through Ireland and end up being costed to Bermuda, where its intellectual property is registered — Bermuda waives corporate taxes.

While this structure is legal, it is deemed unethical and labeled by some as tax avoidance. Government leaders have suggested the formation of a committee to oversee the tax arrangements of major firms and European Union leaders have recently vowed to monitor the situation.

Schmidt maintains that corporate taxes should be collected not where products are consumed, but rather in the country where a company conducts economic activity and takes risks.

While Schmidt’s statements on Google’s lawful tax practices have not been refuted, a former Google executive has recently stepped forward to claim that the company has misrepresented sales to avoid paying taxes.

The question about ethics also remains had to ignore, especially in emerging markets with struggling economies.

Source: BBC News



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