Outrage over tax avoidance has bubbled up this week with the visit of Google’s executive chairman Eric Schmidt to the UK. The crucial agreement that has brought criticism of Google is that the sale of a product over the internet is treated just like the sale of its physical equivalent, and therefore taxed in the country where the company is domiciled. Martin Hearson argues that the system as it stands now suits countries like the US and UK, which are home to large multinationals that sell services abroad without needing a big physical presence. This is why the UK opposed the proposed changes at a meeting debating international tax rules last year.
Google’s executive chairman Eric Schmidt visited the LSE this week after a period of unprecedented criticism of the search giant. I wonder if he still feels the same way today as he did last October, when he told journalists:
I am very proud of the [tax] structure that we set up. We did it based on the incentives that the governments offered us to operate…It’s called capitalism. We are proudly capitalistic. I’m not confused about this.
Last Thursday Matt Brittin, the company’s vice president, was told “I think you do evil” by the chair of parliament’s Public Accounts Committee when he made a second appearance to defend what he had openly admitted were the company’s tax avoidance activities.
Coverage of a pre-G8 summit meeting for business leaders at 10 Downing Street on Monday, attended by Schmidt, focused on the tax avoidance questions, and whether the company’s tax practices had been discussed. David Cameron and Nick Clegg did indeed claim to have challenged Schmidt for his aggressive tax position. On Wednesday, Ed Miliband took the fight to the belly of the beast, throwing the company’s own words back at it. He said: