Google boss defends 'immoral' UK tax arrangements

Google executive chairman Eric Schmidt has offered an unyielding defence of the Big G's tax records in the UK. Schmidt claimed that Google, which paid only £6m in tax on its £395m revenue in 2011, not only complies with UK law, but that the services it provides are boosting our wobbly 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 told the BBC's World at One today. In the UK, Google employs around 2,000 people, nearly 4 per cent of its worldwide workforce.

Its tax behaviour is nothing unusual, as Schmidt was keen to point out, and is similar to the way all multinational companies handle their taxes, including British companies in America.

Though Google is not breaking the law, its behaviour was described as "immoral" by Margaret Hodge MP, chairman of the Public Accounts Committee. A hearing was called last year after it became known that Google, and other multinational companies such as Amazon, Apple and Starbucks, were paying little in the way of corporation tax. Between 2004 and 2010, Google paid a mere £8m to Her Majesty's Revenue and Customs.

Google pays less tax by putting all of its UK revenue through its 'HQ' in Ireland, which has a corporation tax of only 12.5 per cent, before passing it through tax haven Bermuda on its way back to the US. It's only paying tax on the 10 per cent commission paid by the Irish part of the company to the UK arm. Structuring your company in such a way as to minimise the tax you're liable to pay is entirely legal -- tax evasion, illegal; tax avoidance, legal.

"We fully comply with the law, and will obviously, should the law change, we will comply with that as well," Schmidt said.

Schmidt also spoke about his controversial trip in January to "by far the most isolated country on Earth", North Korea. It seems his aim was to get government officials to allow access to the Internet as a way of allowing North Korea to become a "proper country".

"The average North Korean person is completely cut off from any of the kinds of conversations or knowledge that's going on globally," he said, which is depressingly what the rulers of North Korea rely on.

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