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back to article Schmidt 'very proud' of Google's tiny tax bill: 'It's called capitalism'

Google executive chairman Eric Schmidt has dismissed criticism over how little corporation tax his company pays, saying it's just capitalism. Schmidt is "very proud" of the corporate structure Google set up to divert profits made in European countries, such as the UK, to its firms in the low-tax havens of Ireland and The …

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Mushroom

Don't be evil!

My foot

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Meh

Can see

Rules being changed to stick one right up where the sun don't shine.

Being flippant is not always the best way to make friends but he does have a point.

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Coat

Re: Don't be evil!

Why? What has your foot done?

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Mushroom

Re: Can see

"but he does have a point."

Indeed, one could argue that the entire tax structure of 'Europe' has been built around these principles - why on Earth would any business not take advantage of lucrative tax situations - as long as it's all legal.

I get a bit fed up of politicians claiming someone else is morally bankrupt - talk about pot meets kettle. Fiddling expenses is ILLEGAL, but tax AVOIDANCE is not - not that hard to work out.

If the politicians weren't in it up to their necks they would be closing the loopholes - but all we get are soundbytes, inquiries and 'he's been bad - won't the public please punish them for us because we can't because they haven't done anything illegal'.

Bloody hypocrites.

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Re: Sir Runcible Spoon

What he said!

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Re: Don't be evil!

An evil hand could get you into all sorts of trouble, I'd settle for an evil foot if those were my choices

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Re: Can see

One might even suggest that if most politicians are corrupt, keeping money away from the taxman is ones moral duty, and highly praiseworthy.

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@Sir Runcible Spoon Re: Can see

Well said, sir.

It isn't the place of politicians - corrupt or otherwise - to stand there pointing the finger and single out individuals (such as Jimmy Carr) or even big companies. It's their job to audit the companies they suspect are avoiding the most tax, and close the loopholes being used.

At the risk of sounding evil, I actually think it's quite refreshing the hear someone like Schmidt come out and basically say "Yeah, we avoid paying large amounts tax, but it's all legal, baby. Fuck you."

Tax accountants only exist to help you get away with paying as little as possible. Google's are obviously better at it than most.

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Anonymous Coward

Re: Don't be evil!

The evil ones are those who wish to steal others money, because they feel somehow, "entitled to it".

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Anonymous Coward

Re: Don't be evil!

"The evil ones are those who wish to steal others money, because they feel somehow, "entitled to it"."

We don't have to let Google do business in the UK. Booting them out might even help local startups.

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Re: Don't be evil!

"We don't have to let Google do business in the UK. Booting them out might even help local startups."

An interesting one. Short of Chinese or Iranian style measures, how do you propose you do that? I'd expect such ill-thought ideas in the Mail, not on the enlightened El-Reg.

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Re: Can see

I'll drink to that..!

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Anonymous Coward

Re: Don't be evil!

"An interesting one. Short of Chinese or Iranian style measures, how do you propose you do that? I'd expect such ill-thought ideas in the Mail, not on the enlightened El-Reg."

Google are primarily an advertising business. They offer 'free' services in order to collect data about users so that they can better target their advertising. They do this because companies will pay more for targeted advertising.

You're right that Google can't be stopped from offering its 'free' services in the UK unless some form of censorship is instituted. However, if it is illegal for companies operating within the UK to advertise using Google then any data Google has collected about UK residents becomes valueless (I suspect the CIA don't pay anything for access to this data).

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Re: Can see

Tax AVOIDANCE IS illegal. This implies hiding money, not reporting money, laundering money etc.

Tax MINIMIZATION is legal. This implies using legal means to reduce your tax bill.

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Holmes

Re: Don't be evil!

The google could be innocent if they weren't the leading lobbyist among American high-tech companies. You see the way it works in America is that most businesspeople are fine and upstanding, but the rules of the game are encoded in laws written by the most easily bribed politicians. How many guesses do you want as to who is doing the bribing? Hint, it is not "most businesspeople". If you guess the least ethical businessmen, then you win. You also lose, unless you're one of them.

In other words, the google is not becoming evil just because the rules of the game in America require them to become increasingly evil. The google is "investing" to control how those rules evolve to require ever greater levels of evil just to keep your company alive.

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Re: Can see

Actually, tax avoidance is legal. Tax evasion IS illegal. Like others say, it's the polititians job to close the loopholes. It's a companies job to maximise it's profits legally.

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Re: Can see

Nice rant I agree with, however 'we' are the real culprits, we elect those politicians, we have the leaders we deserve.

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IT Angle

weird

Why are people being blasted for using the tax rules to their advantage? surely it's the rules that need to be changed if this is the result of it.

I don't blame rich people for trying to pay as little as they can, we all do that. It's the rules that facilitate this that need to be looked at.

And yes, i think Google should pay a shitload more tax, just look at how much they made in the past few years.

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Anonymous Coward

Re: weird

because, we wish we could do exactly the same, or even better, but can't really afford the services of those sandwich-making accountants / lawyers.

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WTF?

Re: weird

Not only that, I imagine executives of publicly traded companies are legally obliged to serve their shareholders by minimising their tax bill. So we have the bizarre site of committees of people who make the laws, railing against people for obeying them.

Why don't they do something useful and change the damn laws?

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Re: weird

Couldn't agree more. No-one likes it and mostly everyone thinks it's a sneaky thing to do, but they didn't break any laws so hounding them for legal conduct will only ensure less cooperation in the future. And it's the future we should be looking to by closing these loopholes. In the modern business world, no CEO or CFO REALLY has any choice in the matter - if word got out they were planning to pay millions more in tax than they could legally get away with, they would be booted out and replaced with someone else.

For my money the only long term workable plan is to have a mandatory percentage of tax applied in the jurisdiction of the consumer, before whatever tax haven Amagoog is in this week gets a look in. It's the only way tax revenues will have a hope of rising or falling proportional to the population the taxes are collected to support. The big problems with this are implementing such a shift without violating international agreements, the risk of corporations sneaking on a stealthy price rise when they can blame it on the government, and the risk of smaller businesses suffering from increased complexity/costs.

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Re: weird

> For my money the only long term workable plan is to have a mandatory percentage of tax applied in the jurisdiction of the consumer

Brilliant idea!!!! Why don't we call it errrr..... I don't know.... VAT?

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FAIL

Re: VAT

Doh! VAT is paid by the end-consumer, NOT the suppliers of the goods or services.

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Devil

We wish we could do exactly the same - was: weird

It's easy to do; just follow the scheme set up by thatchers grubberment and availed of by David Cameron father ,

  • Set up an offshore shell company based in the low tax jurisdiction of Jersey
  • Get your salary paid in to your company
  • Take a loan from your company knowing that you (AKA "the company") will never look for the loan to repaid

Simples!

And remember it's only morally repugnant if you're not a Tory .

IF politicians want to close down these sort of tax loopholes they could, as I always say, follow the money

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Re: VAT

Theoretically, but in reality, it's part of the price. if corporation tax were cut, or even abolished, and VAT increased, the price should not really increase. You're simply moving where the tax is taken.

Problem is, the final sale price is not necessarily related to the profit on the item and therefore it would be almost impossible to set a sensible VAT rate that worked for everyone.

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FAIL

Re: VAT

Yes, VAT is paid by the end consumer, SO IS TAX,

if the tax bill goes up, so will the prices to compensate!

Anyone who thinks taxes are paid by anyone but the consumer doesn't understand economics (and unfortunately that also means most economists)

All taxes are added into the price of the goods, so the consumer pays it..

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Re: weird

"because, we wish we could do exactly the same, or even better, but can't really afford the services of those sandwich-making accountants / lawyers."

If the system is set up such that it is cheaper to pay an accountant to avoid the tax liability, then *obviously* that will happen. Apparently only the politicians are too effing thick to see this.

If we ignore this systemic problem and instead insist that Google pay more tax than they need to then firstly their shareholders will sue them and secondly we are effectively asking them to make voluntary contributions to our nation. Does "begging" sound like a sane way to finance public services?

We've identified a handful of major corporations that are avoiding tax. Great. This gives us a clear example of what is wrong with the system. Now we need to kick the damn politicians up the arse hard and repeatedly until they fix it.

Blaming the corporations merely lets the politicians off the hook. It is *all* the politicians' fault.

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Headmaster

Re: VAT

Companies don't really pay tax, people do. Taxing companies is simply indirect way of taxing customers or shareholders.

What Adam Smith said about tax :-

The Four Cannons of Taxation.

Equality – Tax payments should be proportional to income

Certainty – Tax liabilities should be clear and certain

Convenience of payment – Taxes should be collected at a time and in a manner convenient for taxpayer

Economy of collection – Taxes should not be expensive to collect.

Corporation Tax does not fair too well on any of those.

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@Mike2R (Re: weird)

"So we have the bizarre site of committees of people who make the laws, railing against people for obeying them".

Very rarely, one sees a single sentence that perfectly sums up a discussion, to the point that there is little more to be said about it. This is one of those sentences - how I wish I had thought of putting it so neatly! (Like ancient Greek craftsmen, Mike has even put in a small deliberate flaw to avoid offending the Gods). 8-)

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Unhappy

Re: VAT

all tax is paid by the end consumer one way or another...

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JC_

Re: VAT

All taxes are added into the price of the goods, so the consumer pays it..

You don't understand corporate tax.

Tax is paid on profit. Even if the profit on doing business is lowered, as long as it is still profitable, a company will provide that good or service.

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Mushroom

Re: VAT

"Anyone who thinks taxes are paid by anyone but the consumer doesn't understand economics "

I think that more than adequately sums up what all these 'tax' stories are about, a lack of understanding, and that from the people we have in charge of fixing the economy the previous lot destroyed? We're doomed I say, we're doooooomed!

BOFP Calc: Google generated $4.1b in sales in the UK, and therefore extracted approx £500m from UK consumers on behalf of the UK government. That has got to be worth more to the UK economy than whatever corporation tax those fools think Google should be paying.

(Note: very approximate calculation due to not knowing whether the $4.1b included VAT or not, or even whether VAT was chargeable on all of it.)

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Re: @Mike2R (weird)

LOL, thanks Tom.

"...flaw to avoid offending the Gods."

Oddly appropriate since the lack of proof reading was due to me trying to comment without the boss realising I was posting to a forum ;)

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Re: weird

Yep, completely agree, it's the rules that must be changed. However Schmidt's ode to capitalism is leaving out one dirty little secret. The rules are made and can be changed by politicians, the politicians need money to be (re)elected, and the only people with enough money to give them a good (re)election chance are Google and all the other big capitalists, whose lobbyists are dictating to the politicians what laws to pass.

That's why the politicians are paying lip service to lambast the tax-avoiders in public, while privately making sure that the tax system stays full of friendly legal tax-avoidance loopholes

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Re: VAT

Whenever I read a story like this I end up foetal-like in the corner of the room muttering 'tax incidence...tax incidence...tax incidence' .

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Devil

Re: weird

" can't really afford the services of those sandwich-making accountants / lawyers."

What we REALLY can't afford are the services of the politicians who are much more amenable to the lobbyists' coin

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Holmes

Re: VAT

Any increase in taxation will be paid by the end consumer as well.

Corporations don't "pay" tax as such - the burden is placed elsewhere; either the consumers buying their products or the shareholders. It is naive to think that shareholders will end up receiving less dividends...

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Re: VAT

"BOFP Calc: Google generated $4.1b in sales in the UK, and therefore extracted approx £500m from UK consumers on behalf of the UK government. That has got to be worth more to the UK economy than whatever corporation tax those fools think Google should be paying."

You mean, unless it's business-to-business selling, like, I don't know, advertising, which isn't subject to VAT. Google give essentially nothing to the UK economy but extract $4.1bn from it.

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Re: VAT

Do you honestly believe that corporation tax isn't paid by consumers? It's in the raft of indirect expenses that the corporation has to recover from revenues so it's right there in the consumer's price ticket together with what they are paying for rent, MFPs, toner cartridges etc etc.

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Unhappy

Re: It is *all* the politicians' fault.

Well said, Ken. Sadly, who are the politicians more likely to listen to - the wealthy, with their party donations and media influence, or the voting public?

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Re: VAT

You don't understand business.

If the profit doesn't exceed the actuarial risk of loss, the business will either not be started or fold at the point the loss arrives.

There is no point in risking one's (hard earned) capital in business (especially with all these pesky laws to protect employees) if the odds aren't favourable.

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Re: weird

"Why don't they do something useful and change the damn laws?"

Because then they (the MPs) would be poorer and/or not raise the capital to be reelected

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Re: VAT

Corporation tax is a tax on profit, not on turnover, so it only comes into play if a company is already profitable.

What is ultimately paid by consumers is the cost of letting giant corps spirit money out of the country, because it creates a market distortion that favours the large multinationals over smaller, local businesses. This is why the loopholes need to be closed.

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Re: VAT

VAT for online services isn't paid where the customer is located - it's paid where the seller is `based`.

Guess where Google is `based` - it's not London

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Re: weird

No - CEOs have a duty to maximize value to their shareholders.

If the company got boycotted by all UK consumers and went bust because the CEO found a clever way to pay less than minimum wage or not pay NI then the shareholders are going to be unhappy.

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Headmaster

Re: VAT

Anyone who thinks taxes are paid by anyone but the consumer doesn't understand economics

Lots of people don't understand economics, mostly commentards, politicians and economists :-)

There are a couple of factors that affect demand for a product:-

  • Disposable income
  • Personal taste
  • Price of substitutes and complements
  • Market size

If google was taxed more and it passed on to the people who pay for adverting then that will increase the costs for people buying adverting who in turn would analyse the cost-benefits of paying for adverting with google. This may force the advertiser to look at substitutes (Bing???? Ha ha ha) resulting in a drop in income for google. Therefore google cannot afford to pass on a tax increse to advertisers (well not all of it anyway).

I'm not sure how this applies to oligopolies like google, mickysoft, etc.

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Anonymous Coward

Re: weird

we can't - but we do. And they know it and carry on.

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Stop

Re: weird

Because these rules don't apply to us. We are discriminated against.

If you try to pull the stuff these guys are pulling, you would be fined.

On the other hand, those incompetent politicians have to do their job, and that is to design a simple, transparent and fair tax system.

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