Eric Schmidt: Google’s tax payment compliant with law

Defending the company over its tax payments, Google executive chairman Eric Schmidt said what the company was doing was legal,  and if the UK wanted to collect more tax, it should change the law.

Schmidt insisted the company would comply with British law if it was changed and claimed to be perplexed by the debate.

He said Google had a fiduciary responsibility to its shareholders that prevented the internet company from payment of more than required taxes abroad.

Speaking to BBC Radio 4's Start the Week, Schmidt said, if UK wanted to collect more tax, it needed to change the law. He said, what his company was doing was legal, and he was rather perplexed by this debate, which had been going on in the UK for quite some time because he viewed taxes as not optional. He said, his view was that one paid the taxes that were required to be paid under the law.

He said if the British system changed the tax laws then the company would comply. If the taxes went up Google would pay more, if the taxes went down Google would pay less, and that was a political decision for the democracy that was the UK.

Public criticism of Google has been mounting, which included some rather unusually frank words from senior politicians, after the House of Commons public accounts committee took it to task this month over figures that revealed payments of £3.4 million in tax on £3.2 billion of sales to customers in the UK last year, with sales technically accounted under low-tax regime of Ireland.

Meanwhile, Margaret Hodge,  head of the Parliamentary Public Accounts Committee, has suggested formation of a new committee to oversee the tax arrangements of major firms.

Speaking to The Independent she said such a committee could hear evidence from companies in secret, meaning that companies would not be able to hide their tax affairs behind confidentiality rules.

Google, with its UK sales routed through Ireland, was one of the multinationals strongly criticised for organising their tax affairs in ways that minimised the amounts they paid in the UK.

Last week, EU leaders agreed on tackling avoidance through an "automatic information exchange between tax authorities" to monitor the situation.

Schmidt had earlier argued that corporate taxes be paid on a company's profits, not revenues, and need to be levied in the country where it conducted economic activity and took risks, rather than where products are consumed.