Google boss Eric Schmidt under fire as he defends tax avoidance

Google chairman Eric Schmidt today came under withering criticism from senior politicians and media-industry figures after he attempted to defend the internet giant’s corporate tax avoidance.

Schmidt told Radio 4 the fact Google pays virtually no tax on UK profits despite sales of £3 billion was just “the way taxes are done globally” and that “you have to look at it in totality”.

He stressed that Google is “investing heavily in Britain” by hiring more than 2000 employees and “we empower literally billions of pounds of start-ups through our advertising network”.

But Margaret Hodge, the Labour MP who chairs the Commons Public Accounts Committee, told the Evening Standard: “I just think it is completely, utterly and totally wrong that a global company can be so relaxed about engaging in economic activity in a country and making a profit out of it and feeling no responsibility to pay its fair share of tax.”

Google said in its US stock-market results it generated £3.1 billion in the UK last year. But it diverts most of its British revenues via Ireland. Its last Companies House filing said Google UK had £396 million in annual sales and paid £7.3 million in corporation tax. Google uses similar tactics worldwide, paying just £227 million in “foreign” corporation tax despite £16.9 billion in sales outside America last year.

Hodge said: “I am fed up with companies saying they pay a bit of PAYE [employee tax] and business rates and National Insurance, and that should do. They say ‘we are putting things in’, but they are absolutely taking things out. They need transport infrastructure, they need their bins collected. For them to take and not give is simply wrong.” She said her committee, which called executives from Google, Amazon and Starbucks to testify last autumn, will return to the issue.

Luke Johnson, boss of private-equity firm Risk Capital Partners, said: “My companies employ perhaps five times as many staff in Britain as Google and pay far higher rates of corporation tax. They do not make an appropriate contribution to our economy and are a parasite and betray capitalists everywhere.”

Asked if he was worried about criticism, Schmidt, pictured, said: “We worry about everything at Google.”

James Ashton, City Editor

It is the Achilles heel of any large corporation doing business in Britain.

From selling coffee to computing, how can you be a fully paid-up member of society if most people think you are a tax avoider?

Never mind that Google is operating well within the law, supporting thousands of jobs and has become a prime mover in Tech City — they have to be seen to be paying their way, not just breezily trying to dismiss the debate.

The search giant has tried a similar tack with privacy, and European regulators are still threatening fines. Corporation tax alone is a very imprecise measure of how much a firm contributes to the Exchequer. Benefits from tax credits or making investments here means that at any one time dozens of FTSE 100 members aren’t paying much of it.

But it will remain the lightning rod down which criticism is conducted unless big business can convince otherwise.