Under fire for evading UK taxes, Google's Schmidt seeks to blame system

Google, savaged by MPs for avoiding billions in British taxes, has sought to deflect the blame by shifting the focus to the tax system.

Executive chairman Eric Schmidt, writing in a Sunday newspaper, has urged the UK Chancellor of the Exchequer George Osborne to lead reform of the international tax system. He said he aimed to move the controversy over corporate tax avoidance ''away from accusation and toward action.

Google's tax affairs were branded ''rather devious'', ''calculated'' and ''unethical'' by a parliamentary Public Accounts Committee.

The 58-year-old Schmidt acts as an advisor to Chancellor Osborne. He is due to attend a meeting of business leaders to be hosted by the Prime Minister today.

In his article, he blamed the system and criticised "lobbying" by politicians. ''When legislators are doing the lobbying and companies are articulating the law as it stands, it's a confusing spectacle for everyone,'' he said.

''Given the intensity of the debate, not just in the UK but also in America and elsewhere, international tax law could almost certainly benefit from reform.

''The UK government has the perfect opportunity to take the lead in shaping this complex debate at the G8 summit next month. We hope George Osborne seizes the initiative and makes meaningful tax reform one of the top items on the agenda.''

Former Google executive Barney Jones was simultaneously reported as saying he has material proof that shows Google UK has been carrying out tax avoidance. Jones is a key witness in the current investigation into Google's tax practices in the UK.

Jones worked for the company between 2004 and 2006 and reportedly handed over around 100,000 emails and documents to the tax authorities.

The material proof, he says, proves that Googe's London sales staff would negotiate and sign contracts in the UK, and cash went into a UK bank accounts, "deals were technically booked through its Dublin office to minimise its liabilities here," The Sunday Times reports.

Google paid only £10 million in tax on British revenues of £11billion between 2006 and 2011 by booking advertising sales in Dublin despite its large London-based sales staff.

MPs rounded on Matt Brittin, the head of Google's northern European operations, last week and repeatedly accused him of misleading an earlier hearing at which he said British staff were not selling (See: Google denies 'minimising' tax bills in the UK).

''To pay the right amount in taxation, you need to determine where the profit is actually created,'' Schmidt wrote in defence of Google's tiny British tax bill.

''Most of Google's engineers are based in the US and that's where much of our product development takes place. So we pay more taxes in the US than in any other country - around $2 billion in corporate income taxes to the US government in 2012.

''This system ensures that the same profits are not taxed twice, or even more than that, across different countries, something that would reduce any company's ability to invest in future research or new jobs.''

Google's British revenues do not reach American shores and are instead funnelled to Bermuda via Ireland and the Netherlands. It told the Public Accounts Committee it used its billions in the tax haven to for investments such as the new £1 billion offices it is building at King's Cross.

''It's been estimated that this investment will generate some £80 million a year in new employment taxes and £50 million in stamp duty,'' Schmidt said.

Criticism of Google and tougher multinationals such as Amazon and Starbucks is unlikely to fade, however. Even as he tried to shift attention to politicians, 34-year-old Barney Jones, a devout Christian, said he had given the Public Accounts Committee a file of more than 100,000 documents detailing the company's operations.

He said the company's line that London staff should support and encourage sales rather than sell was ''scandalous''.

''When I was at Google our job was to find advertisers, to close the deals (and) to get them to sign bits of paper saying they were committing to spend in the UK," said Jones.''Google has pulled the wool over the eyes of HMRC (Her Majesty's Revenue & Customs).''

Google maintains that it abides by tax laws everywhere it operates.

''Our hope is to move the debate forward, with everyone engaged constructively in developing a clearer, simpler system – one in which companies that abide by the law know that the politicians who devised the rules are willing to defend and commend them,'' said Schmidt.

A statement given to The Sunday Times by Peter Barron, Google's head of external relations, states, "As we said in front of the Public Accounts Committee, it is difficult to respond fully to documents we have not seen.

"None of the allegations put to us change the fact that Google pays the corporate tax due on its UK activities and complies fully with UK law."
(See: Tax evasion: act now or we will, Labour tells government)