Google’s executive chairman Eric Schmidt on Sunday defended the US Internet giant’s tax arrangements after claims it has unethically dodged paying vast amounts of British tax.
Writing in Britain’s Observer newspaper, Schmidt insisted that Google “has always aspired to do the right thing” and that the company pays “significant” amounts of British corporate, local and employment tax.
But he added: “International tax law could almost certainly benefit from reform.”
Margaret Hodge, chairwoman of the British parliament’s influential Public Accounts Committee, last week described Google as “evil” as she grilled its vice-president Matt Brittin.
Google generates around £3.2 billion ($4.9 billion, 3.8 billion euros) in Britain a year but paid only £6 million in British corporation tax in 2011.
The online search giant routes all of its European advertising sales through its offices in Ireland, where businesses enjoy relatively low tax.
“When a company only operates in one country, it’s obvious where its profits are generated and thus where its taxes should be paid,” Schmidt wrote.
“But for multinational companies with a global presence, it’s much more complicated. To pay the right amount in taxation, you need to determine where the profit is actually created.”
But a former Google executive who gave evidence to Hodge’s committee told the Sunday Times newspaper that the company was operating an “immoral” tax avoidance scheme.
“The real victims are ordinary taxpayers in Britain who are being cheated by Google,” Barney Jones told the broadsheet.
Schmidt said corporate tax was “rightly a hot topic” at a time of economic hardship, but insisted that tax rules are set by politicians and it is up to them, not companies, to reform them.
“The UK government has the perfect opportunity to take the lead in shaping this complex debate at the G8 summit next month,” he wrote.
Leaders of the world’s eight biggest economies are due to meet in Northern Ireland on June 17-18.
Schmidt is due to meet with Prime Minister David Cameron on Monday at a gathering of the premier’s business advisory group.
A Downing Street source said that tax would be up for discussion at the meeting.
“Tax will be discussed as part of a wider discussion on the economy and the G8 agenda,” said the source. “Nothing is off the table.”