Google's Eric Schmidt: UK Should Change Tax System, Google Not to Blame
May 28, 2013 10:05 AM
comment(s) - last by
He said Google pays exactly what it's supposed to pay
The United Kingdom has been looking into the tax-paying practices of large companies, and Google's Eric Schmidt doesn't see the big deal.
Schmidt, Google's executive chairman, defended Google -- which was criticized for profit shifting and dodging larger tax payments -- saying that the UK should change its tax system if it wants large companies to pay more or less each year.
"What we are doing is legal," said Schmidt, referring to Google's UK tax payments. "I'm rather perplexed by this debate, which has been going in the UK for some time, because I view taxes as not optional. I view that you should pay the taxes that are legally required. It's not a debate. You pay the taxes.
"If the British system changes the tax laws, then we will comply. If the taxes go up, we will pay more, if they go down, we will pay less. That is a political decision for the democracy that is the United Kingdom."
Earlier this year, it was reported that
Google avoided paying about $1.6 billion USD
(£1 billion) in UK taxes. Google sent £6 billion through Bermuda over the course of the year, which halved its 2011 tax bill. In fact, Google funneled 80 percent of its global revenue through the island and ended up paying about £1 billion less to the government.
David Cameron, the Prime Minister of the UK, said that companies like Google are immorally minimizing tax bills and need to be stopped.
Just last month, the
UK openly stated that it was concerned
with the fact that Google only paid £6 million ($7.8 million USD) in UK corporation tax. Schmidt defended Google at that time as well, saying that Google "empowers literally billions of pounds of start-ups through our advertising network" and is "a key part of the electronic commerce expansion of Britain, which is driving a lot of economic growth for the country."
Google isn't the only large company under the microscope. Apple is also being questioned for profit shifting, where it made an estimated £6B ($9.50B USD) in Britain last year, but
paid only £10M ($15.8M USD) in taxes
. Apple was able to do this because of the British tax code's rule that largely exempts companies based in Ireland from paying British taxes.
Apple CEO Tim Cook offered
tax reform proposals
to U.S. Congress at a Senate hearing last Tuesday in an effort to bring back foreign earnings to the United States. Furthermore, he's suggesting that this money be invested in research and development and creating jobs in the U.S.
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5/28/2013 2:56:43 PM
raising taxes is only a short term solution. If you raise taxes then businesses suffer and cause higher unemployment. Taxes are already high in both UK and US.
In this economy, the government is supposed to bite the bullet. To stimulate the economy again it must lower interest rates, increase spending, lower taxes. After the economy is going strong you raise taxes, lower spending, and increase interest rates to stop inflation.
So in a bad economy, the government will be in huge deficit to help the economy recover. When the economy is back up, it's supposed to use the surplus to repay the debt. The problem is when there's a surplus, they just spend more instead of repaying debt. People don't pay attention because their life is good so they get away with it. Eventually, every 1st world country is in a massive amount of debt. This happens to every 1st world country so far.
5/28/2013 4:29:58 PM
The main problem is that no one can implement and maintain a long-term plan like that. One of the weaknesses of democracy is that it's difficult to make things happen on a long scale because the leaders keep changing.
5/29/2013 3:27:48 PM
That's not the only problem. How do you know when an economy is indeed "back up"?
What if today's unemployment is actually good compared to 10 years from now, when automation replaces even more jobs, and the beneficiaries of that income shift barely increase their consumption to create new jobs?
Even today, people compare to 2007 to point out how bad the economy is, as if that was a sustainable economy. The only reason unemployment was so low back then is that we tapped into equity to create debt like crazy ("we've done it for 25 years without a banking crash, so why would it crash now?"), allowing people to spend and invest more than they normally would. We built houses, bought cars and stocks on HELOCs, etc. Now that financial resource is completely tapped out.
So really, we have no idea what a good economy is and what a bad one is. We just make flawed historical comparisons.
The mechanism you describe is also broken now that we're in a new world with sustained 0% rates that
increasing spending and inflation. That wasn't supposed to be possible. Surely well off people would spend now rather than watch their earnings shrink in purchasing power with 0% saving, right? Apparently not.
"I'm an Internet expert too. It's all right to wire the industrial zone only, but there are many problems if other regions of the North are wired." -- North Korean Supreme Commander Kim Jong-il
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