Google’s Executive Chairman Eric Schmidt is known for frank speaking even when he says something unpopular. Recently, he was at it again, defending his company’s avoidance of British taxes. Documents show that the search giant earned £2.5 billion in UK sales last year but paid just £6 million in taxes. Google has also been revealed to have sheltered nearly $10 billion of its revenues in Bermuda allowing it to avoid some $2 billion in worldwide income taxes in 2011.
But Schmidt said such schemes were legitimate and the company paid taxes “in the legally prescribed ways”. “I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate,” he said. “It’s called capitalism. We are proudly capitalistic. I’m not confused about this.”
He also said they would not be following Starbucks in voluntarily handing more money over to the UK Government.
Google has also announced it will now charge small business users for using some formerly free Web-based services, such as text-editing, spreadsheets and even Gmail. It will charge the more than 5 million businesses with 10 employees that use the services $50 per user per year in America, £33 in Britain.
It says by doing so it would be able to provide better support to businesses, such as 24/7 tech support and larger in-boxes. Though there will be no charge for individuals, this is a significant change for the company. The company, long known for it’s software applications, is already literally breaking new ground in becoming an ISP telco in Kansas City, and by manufacturing an inexpensive laptop, the Google Chromebook. Has it gone too far?
Of course, Google isn’t the only tech corporation playing such tax games. Apple is headquartered in Cupertino, California, but its office in Reno, Nevada, collects the money and pays taxes, allowing them to pay 0% state corporate tax, instead of 8.4%.
Both corporations have their fans, and gained a lot of good will by treating their employees well and promoting certain ideals. Google has sought to organize the world’s data by giving its search services away in exchange for user data, but it’s been years since they quietly dropped their famous motto: “Don’t be evil.” Google is just a company like any other. Perhaps it’s naive to expect them to act altruistically, but it is not to expect them to behave like good corporate citizens rather than robber barons.
Some governments think so. Both Australia and France have announced plans to rein in Google and other corporate tax avoiders through such schemes. But the biggest sign that Google’s perhaps gotten a bit too big for its britches is that, in October, the IRS announced it was secretly auditing the company over offshore issues. They are interested in several major acquisitions, including YouTube, and now the Securities and Exchange Commission is interested too.
A spokesman for the company said it was a “routine inquiry” and declined further comment. Time will tell, but this may well be a story the search engine would prefer not to link to.