Google’s Schmidt On Bermuda Tax Arrangement

Google’s executive chairman Eric Schmidt yesterday [May 22] denied there was anything  ”unethical” about the Internet search giant’s tax operations — which  see most of its UK profits channelled to Bermuda — and argued it was up to governments to create unambiguous laws and regulations and for businesses to abide by.

Defending the arrangement whereby most of Google’s profits from its British operations are funneled through Ireland and the Netherlands to Bermuda — with the company paying an effective rate of less than one per cent — he said: “Virtually all of the American companies have tax structures like this.

“And there are analogous structures for European companies in America. But governments have a lot more power than we do. We have to follow the law and if the law changes we will absolutely follow it.”

Mr. Schmidt [pictured] was speaking at Google-sponsored “Big Tent” conference of corporate, political and community leaders held in the United Kingdom.

Corporate tax avoidance has become a major political issue in the United Kingdom after the Reuters news agency revealed the complex strategies used by the Internet search giant to shift profits to low- and zero-tax jurisdictions.

Bloomberg TV report on Google tax arrangements involving Bermuda

The Google executive said multinational companies could not always try to obey “the spirit of the law” when they operated in many jurisdictions and had a duty to their shareholders.

Asked directly if he thought Google’s tax arrangements were unethical Mr. Schmidt said “No”, adding that Google was operating in a complex global marketplace.

He said he welcomed the ongoing debate on the issue of corporate tax avoidance in the United Kingdom and the European Union, saying Google will be “compeletely transparent” about its arrangements.

British Prime Minister David Cameron has said the issue of tax avoidance will feature prominently at the upcoming G8 summit of leading industrialised nations.

The United Kingdom is hosting the G8 conference and earlier this week the Prime Minister sent a letter to ten British overseas territories and crown dependencies — including Bermuda – asking them to “get their house in order” when it came to multinational corporations operating in their jurisdictions which exploit loopholes in international tax codes.

In his response to Mr. Cameron, Bermuda Premier Craig Cannonier said the island Bermuda is “recognised internationally for its integrity and transparency as a centre for legitimate international business.”

Mr. Cameron’s appeal to the overseas territories came after Britain’s  opposition Labour Party — tapping into mounting public discontent over corporate tax avoidance — demanded the UK government push for new international rules requiring companies to report profit and tax payments on a country-by-country basis.

British campaigners say such a move, which is receiving increased support internationally despite strong opposition from business, would deter companies from shifting profit into “tax havens” where they have no staff or sales,

Corporate tax avoidance is now being targeted on several other fronts as well.

The Organisation for Economic Cooperation & Development – an international think tank funded by governments around the world — is scheduled to release an “action plan” in July to deal with tax revenue lost to profit shifting. The plan came in response to a request by the Group of 20 nations.

The European Commission also is targeting key rules that enable corporate profit shifting.

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