Schmidt says Google supports tax reform

By James Riches topicIcon Internet News

Executive chairman outlines 'three principles' of Google tax argument

Google executive chairman Eric Schmidt has penned a column for The Observer newspaper, after a turbulent week saw the search engine come under fire for its UK tax activities.

Northern Europe boss Matt Brittin appeared before a House of Commons committee last week and was challenged on evidence he gave six months ago on Google's tax arrangements. Committee chair Margaret Hodge's negative assessment of the corporation's activities, which appears to have prompted Mr Schmidt to step up and address the issues himself.

In a column entitled At Google we aspire to do the right thing. So we welcome a debate on international tax reform, Mr Schmidt made three core points that he hoped would shift the discussion "away from accusation and toward action".

His first argument was that a company's taxes should be paid on profit, not revenue. He noted that this was easily achieved for companies that only operated in one country, as all the profits are generated in the same place.

He argued that for a multinational company such as Google it is important to show where the profit was created - that is, where the economic activity took place and not necessarily where the product was consumed.

Schmidt calls on politicians to initiate law change

Mr Schmidt's other points noted that Google was operating within laws set out by politicians, and it was not fair to blame the company for rules it had no hand in creating. He then called on the UK government to use the upcoming G8 Summit to propose tax reforms, while also warning that tipping the tax balance too far against big corporations would discourage growth and job creation.

Google's recent troubles do not seem to have deterred users, with the search engine securing over 90 per cent of the UK market according to April figures.

Daniel Nolan, managing director at theEword, said: "It was important that Google did not ignore what has happened this week, and by sending out a big gun like Eric Schmidt they've shown how seriously they take this issue. It will be interesting to see how people react to the points he has tried to make."