[governance] Google's Schmidt 'very proud' of tax avoidance scheme

[michael gurstein]

http://www.zdnet.com/uk/googles-schmidt-very-proud-of-tax-avoidance-scheme-7
000008733/

Google's Schmidt 'very proud' of tax avoidance scheme

Summary: The company's chairman has defended the complex arrangement that
sees its UK profits largely funnelled to Bermuda, via Ireland and the
Netherlands. 'It's called capitalism,' he said in an interview on Wednesday.
David Meyer

By David Meyer | December 13, 2012 -- 09:32 GMT (10:32 CET)

Google chairman Eric Schmidt has said he is proud of the company's tax
structure, which has been heavily criticised by lawmakers around the world.
Eric SchmidtEric Schmidt has defended Google's tax arrangements in the UK.
Image: Stefanie Olsen/CNET News

Google paid the UK tax authorities £6m for 2011 despite turning over £395m,
in an arrangement that involves sending its proceeds to a Bermuda shell
company via Ireland and the Netherlands. The firm was, alongside Amazon and
Starbucks, one of the corporations that came in for a grilling by UK MPs
last month over the issue of tax avoidance. A parliamentary committee
subsequently described the complex avoidance schemes as "utterly immoral".

In an interview reported by Bloomberg on Wednesday, Schmidt said the company
was simply engaged in "capitalism".

"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," Schmidt said. "It's
called capitalism. We are proudly capitalistic. I'm not confused about
this."

The Independent also reported Schmidt as saying the company was only paying
the British taxman what it had to.

"To go back to shareholders and say, 'We looked at 200 countries but felt
sorry for those British people so we want to [pay them more]', there is
probably some law against doing that," he was quoted as saying.

The newspaper also quoted a response from Margaret Hodge, the MP who chaired
the Public Account Committee that had criticised Google.
Read this
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"For Eric Schmidt to say that he is 'proud' of his company's approach to
paying tax is arrogant, out of touch and an insult to his customers here in
the UK," Hodge said. "Ordinary people who pay their taxes unquestioningly
are sick and tired of seeing hugely profitable global companies like Google
use every trick in the book to get out of contributing their fair share."

Google has its international headquarters in Dublin, largely because the
Irish government offers generous tax breaks. This means that Google's UK
proceeds go to Ireland, along with most of the profits it makes in other
countries outside the US. However, in a complex process that is nominally
based on intellectual property licensing, much of that cash then goes
through a Dutch holding company to a Bermuda holding company, which
supposedly protects Google's intellectual property.

As the Public Accounts Committee noted in its report, all Google's
non-US-derived profits go to Bermuda, so the company "may be depriving the
USA of legitimate tax revenue as well as the UK".

While testifying to the committee, Google's vice president for Northern and
Central Europe, Matt Brittin, justified Google's low corporation tax
payments in the UK by saying that "all of the engineering work is done in
California".

This came as a surprise to Google's London office, which — according to the
firm's own website — is "one of Google's largest engineering operations in
Europe", having been instrumental in developing "Voice Search, Local Search,
Maps, TV, YouTube and core infrastructure".


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