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back to article Eric Schmidt defends Google's teeny UK tax payouts - again

Eric Schmidt has once again said that it was totally fine for Google to pay just £6m in UK corporation tax - even though it's a multi-billion dollar company. Google was one of several big multinationals, including Starbucks and Amazon, that were singled out for criticism over how little tax they pay in Blighty. With regular …

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Anonymous Coward

Hmm...

"...he still defended the company's tax record, saying that the Chocolate Factory spent plenty of money in the UK and helped the economy along in other ways aside from tax..."

I must give that one a go... An acquaintance of mine is a massive tax avoider, in that she pays herself minimum wage from her company and, somehow has an annual income in excess of £100k, she tried to defend her tax avoidance to a few people in the pub by saying that she gets local kids up onto her farm to help out and this contributed to society more good than the tax she would pay. To say that her arguments weren't met with much enthusiasm would be rather an understatement. Just like Google, she's not doing anything illegal per se, but it's certainly stretching the law way beyond it's intentions.

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Anonymous Coward

Re: Hmm...

I agree with your acquaintance. She is not doing anything wrong. If people want to complain they should vote for smarter politicians who make better laws and hopefully in the process not waste tax money. I am all in favour of paying taxes but not when I see how those taxes are generally used with a level of incompetence that would get anyone fired in a corporate structure.

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Re: Hmm... @ AC no 1

You really dont get it do you? What she is doing is perfectly legitimate and is deliberately enshrined in our current tax laws to encourage entrepreneurship.

If you dont like it go out a start a business of your own to pull us out of this recession.

How many people does she employ that are paying NI etc?

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Re: Hmm...

Sounds like she's taking it to extremes, but I suspect she's just using the same approach that IT contractors have been using for years, pay a low salary (to avoid National Insurance) and then draw the rest of her income as a dividend from the company - but remember the divi is paid from company profits which have been taxed at the same level as basic income. I don't know whether she'll get hit from some higher rate tax on the divi as well - I suspect so. All she's doing is avoiding National Insurance (which is a sort of tax) IR35 was intended to stop that little trick.

For many genuine small companies (not contractors) it's a legit and necessary approach - I'd love to pay myself a few grand regularly every month, but the company income varies wildly during the year, and from year to year, so the 'pay enough salary to qualify for NI contributions' approach, supplemented by a divi of whatever is left over at the end of the year is a perfectly reasonable approach, and in fact is precisely the situation that the rules were devised for.

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Anonymous Coward

Re: Hmm...

She may not be doing anything legally wrong, but that doesn't mean we have to socially condone it ?

Same as being a BNP member. It's not illegal, but you might not have too many friends.

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Happy

Re: Hmm...

Invoking the BNP, I'm guessing you feel your argument is a little weak and hope that some emotional rhetoric reinforces it.

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Re: Hmm... @ AC no 1

No, what she is doing might be legal but it is not moral and it is not right.

The fact was pointed out, she 'earns' a minimal wage to avoid paying tax and has a personal income of around 4x the average. She doesn't pay tax on her income. Her employees might, but that doesn't excuse her not.

I spend my money in the UK, does that mean I should be exempt from paying tax here because I help the British economy by spending my money here? And if so how is that anyone pays tax????

This is the argument being used.

As to other peoples comments about finding smarter politicians, thats the problem, the politicians are too smart, they are looking after themselves and their financially rich backers first, the rest of us can go hang. After all the majority of women who voted for Blair did so for his 'nice smile', those who didn't like Gordon didn't like him because he was grumpy, my mum thinks Cameron is 'wonderful' - because his suit fits properly and she also thinks Milliband is bad because his suit doesn't! The British public are far too stupid, ill informed, ignorant and frankly lazy to elect anyone who wants to help the country succeed.

Tax is actually really bloody simple.

Single flat tax on all income - from what ever source. You avoid the problems of starvation and so forth which led to the complex benefits and the stupid tax allowance schemes by paying a single flat benefit to all adults.

For companies the tax is equally simple - a single flat tax on all transactions done in the UK or crossing the UK border to another country - including on bank transactions. I don't give a fig about your 'profit' because I get taxed on the money that comes into my account (income tax) and the money that goes out (VAT) regardless of the fact that each year I end up with a bigger mountain of debt.

Making tax simple would deny lots of civil servants jobs and stop the MP's helping their rich friends, that is the ONLY reason it doesn't happen.

The rich continue to abuse the rest and to justify their actions by the flimsiest of pathetic excuses.

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Anonymous Coward

@Tony

No, not really, it was just a journalistic shorthand for behaviour which *some* people find offensive, which isn't illegal. It could just as easily have been "people who don't flush after shitting". Not illegal, but socially unacceptable.

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Anonymous Coward

Re: Hmm... @ AC no 1

No, I really do get it. She doesn't employ people on her farm, just organises volunteer days and helps teach kids about farming with other volunteers.

What is being done is perfectly legal, I never said that it wasn't, but avoiding tax and particularly NI when you earn £100k is absolutely not deliberately enshrined into our tax law, it's use of loopholes to get a free ride from the rest of society, which I find particularly repugnant for someone earning such a huge amount of money.

Many loopholes exist by accident or oversight, many are plugged when they are found, some can't be so easily plugged because the loophole comes about from a legitimate need. This is the case where Starbucks were paying all their money in equipment and franchise costs to an offshore company. It's a legitimate business need to be able to do this, but clearly not intended for 100% of a company's money to be sent offshore in this manner.

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Re: Hmm...

If you want to pay more tax than you are legally obliged to then you are free to do so.

I, however, am an avid tax avoider - I've got Premium Bonds, a bunch of ISAs, a pension fund, my charity donations take advantage of gift aid and and I take advantage of duty free shopping whenever the opportunity is presented.

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Anonymous Coward

Re: Hmm...

Errrr... No....

Sounds like she is running a small business, like all businesses you minimise costs...

She is paying her FAIR share of tax.. Any profits she makes, will be taxed at the SME rate...

Unlike others who offshore their money to avoid any UK tax (like a certain comedian did..)

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Re: Hmm... @ Dave 15

I am glad your not in a position to change things...

Yes we need simplification, but your idea would cause price rises and probably collapse the economy...

Also if you had even the slightest idea on how the economy operates, you would already realise that VAT IS a tax on transactions already, it is irrelevant whether it is 'technically' paid by company or consumer as it is paid by the consumer in the end...

and just think, if you taxed on income only, your income is 300k, your costs are 250k, tax is 20%, you are now 10k in debt....

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Re: Hmm... @ AC no 1

Bull

"You really dont get it do you? What she is doing is perfectly legitimate and is deliberately enshrined in our current tax laws to encourage entrepreneurship."

If that were true they would have created tax breaks for doing something that could be considered entrepreneurial. They would not be round about ways of avoiding having your income show up as taxable. It's just the rich don't pay tax.

You are correct that it was "deliberately enshrined" but it has zero to do with encouraging entrepreneurship, unless you define entrepreneurship as having loads of money.

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Re: @Tony

One point every who defends this woman (and presumably Amazon, Apple, Google, Starbucks et al who are all doing the same on a larger scale) appears to be missing is that no one has suggested that what is being done is illegal. Immoral and wrong, maybe, but not illegal. But what is legal and what is right aren't always the same things.

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Happy

Re: @Tony

@Stuart

"But what is legal and what is right aren't always the same things."

Yep, one is subjective and the other isn't.

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Re: Hmm... @ AC no 1

She does pay tax on her income, the last time I checked dividends were taxed.

It's not the same headline rate as salary is taxed at, but given how easy it is for the government to change it, that must be deliberate.

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Re: @Tony

@Stuart

You think that paying yourself taxed dividend from taxed profit is the same as shifting profit offshore to avoid tax...

Logical failure.

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JDX
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Re: Hmm... @ AC no 1

"it is not moral and it is not right." Based on what exactly?

You're also ignorant because this is not true: "she 'earns' a minimal wage to avoid paying tax and has a personal income of around 4x the average. She doesn't pay tax on her income"

Any money she takes from the company has been taxed corporation tax (what Google are avoiding paying). You don't pay personal (income) tax on this income up to the upper threshold because it's already been taxed. If you take income above the upper threshold (about £40k) then you pay some additional income tax on it (about 12% I think) so the income is double-taxed.

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Anonymous Coward

Re: Hmm...

>An acquaintance of mine is a massive tax avoider, in that she pays herself minimum wage from her company and, somehow has an annual income in excess of £100k

Pretty much like any director then - quite a few of whom don't take a wage so by your measure presumably pay no income tax at all.

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Re: Hmm... @ AC no 1

"How many people does she employ that are paying NI etc?"

Fiddling is a way of life. If they are fiddling the tax its odds on they'll be fiddling the NI too. Probably deducting at source and not passing it on to the taxman. In years to come their employees may find they don't have quite as much NI credit as they thought they did.

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Anonymous Coward

Re: Hmm...

Yes, I am a tax avoider too, in that I have ISAs, Premium Bonds and GAYE from my pay, gaining gift aid on the donation. The thing is that these are legitimate, deliberately designed and advertised by government. They are schemes for specific reasons, beit to encourage investment in government, personal saving or charitable giving. Setting up complex financial arrangements to pay as little Ni eer and ers as possible, while earning multiples of average salary is not advertised or in any way condoned by government. They also fairly regularly close down tax loopholes that allow these behaviors, which also makes a statement that it's not ok.

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JDX
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Re: Hmm...

If you want to be a contractor, running a Ltd company is the only really sensible option because many companies will NOT hire sole traders. Contractors go Ltd for other reasons than tax efficiency, that is simply a bonus once they are set up.

Also, if you don't avoid NI, you end up paying both employee AND employer NI as you are the employer - how is THAT fair?

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Anonymous Coward

Re: Hmm...

It's totally fair - if you run a company you have to pay ers, but you by definition employ yourself so you have to pay ees too. It's not as if anyone can be under any illusion that this is not the case, it's part of the legitimate costs of running a company.

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The tax laws are open to all...

Create your own multi-national, billion dollar business and you can do that as well. But its you who has to take the risks etc. MP's also take full advantage of this... so i doubt laws will be changed.

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Happy

Re: The tax laws are open to all...

No. The laws are open to ultra wealthy companies.

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Re: The tax laws are open to all...

Schmidt is perfectly right about the part of capitalism where he's in it for the money, he's abiding by all existing laws, fair enough and kudos to him for being part of building a massively successful company.

BUT when you are spending many millions of dollars in lobbying and paying campaign contributions to politicians to make damn well sure that they will never change the tax code in a way that will cost you billions... well, that has nothing to do with capitalism, it's good old-fashioned bribery, albeit institutionalised and drseesd up in Armanis suits

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Re: The tax laws are open to all...

'Create you own'....

Cobblers

Most - the vast vast majority - of those with money and in charge of huge multi-nationals didn't create it or take the risks. They have the right old school tie, no more and no less. Worse still is that they go from failure to failure at the top of the tree barely pausing for long enough to assess the massive damage they have done to other peoples lives.

Who is running Boots? What did he manage to wreck last time - wasn't it one of our major banks? What about that egit at the top of Nokia? Look at his cv - a list of failures. The same goes for almost all of them (Branson, Dyson and some others are rare exceptions, but in the most cases still got a leg up in the form of capital from reasonably rich families and friends).

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Re: The tax laws are open to all...

Kudos? He joined in 2001 when Google was already huge, Before that he was ceo at Novell - as I recollect that company ended in pretty much humiliating failure... which kind of illustrates a point I made about going from failure to failure getting richer... he won't be poor when google makes a wrong bet eventually and declines even more rapidly than it grew

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Re: The tax laws are open to all...

Lobbying works only when the politicians are ready to be bribed. Or threatened. Or blackmailed.

No-body has yet figured out a way of qualifying a digital transaction into a tax jurisdiction. The EU has attempted to do so with VAT for cross-border supply of services, and it's a dog's breakfast.

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Anonymous Coward

Re: The tax laws are open to all...

Problem is Google have a motto of don't be evil and being immoral isn't far off evil.

Paying UK staff via Ireland is a deliberate fiddle. Just because it isn't illegal doesn't mean it won't be soon.

Using these fiddles is like those "legal highs" that companies sell. They may be legal for a short time but it doesn't mean they're a good thing.

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JDX
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Re: The tax laws are open to all...

Is "don't be evil" the new "Hitler" of online discussion?

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Anonymous Coward

Re: The tax laws are open to all...

@JDX - If you make your corporate slogan "Don't be evil" and then go around behaving in a manner that is at best shady, you'd better expect that people are going to hold you to your soft and fluffy subjective corporate statement, and that's going to be interpreted differently by different people.

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JDX
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Re: The tax laws are open to all...

Only when "people" in question are over-privileged nerds who think shady tax strategy equates with being evil.

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Anonymous Coward

Re: The tax laws are open to all...

Oh, it's the over-privileged who object to tax avoidance, is it? Not say pretty much every major welfare charity in the country?

Let's be totally clear: The reason that Greece and Italy, and to a certain extent Cyprus are in the state that they are in is down to tax avoidance. No ifs, no buts, there is a clear path from the people and companies having a culture of avoiding paying for their society to the society going bust.

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Re: The tax laws are open to all...

Yup, it really is that simple

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Re: The tax laws are open to all...

> The reason that Greece and Italy, and to a certain extent Cyprus are in the state that they are in is down to tax avoidance. No ifs, no buts,

It's actually a lot simpler than that. The government over stretched itself after joining the EU.

They way-over-committed themselves on public spending, and ended up in the shit.

If a startup company spends more money than it makes and goes to the wall, people say that the guy ran the company into the ground. If a country does it, they say that tax avoiders are evil.

Inconsistency much?

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Anonymous Coward

Apple and Amazon worse offenders

but they get protection from the press it seems...

What gives?

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"Fair Share"

Since when has the UK taxation system ever given a shit about being 'fair'.

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Anonymous Coward

Re: Apple and Amazon worse offenders

Microsoft do it as well. ..

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Protection from the press?

Have you been living under a rock? Both of those companies have been in the headlines over the past few months for the same issue... Amazon got it twice as bad.

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Anonymous Coward

Re: Apple and Amazon worse offenders

They don't care about being evil. Google are always trying to make out they are the good guys.

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Re: "Fair Share"

or moral?

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Can anyone explain what ES thinks he might be saying here:

Dear Reg readers,

Can anyone explain what ES thinks he might be saying here:

"We empower literally billions of pounds of start-ups through our advertising network and so forth,"

?

It's a line quoted in the BC and Reg versions of the interview, but I honestly don't have a clue what it means... "We empower start-ups through our advertising network" by letting them pay us to advertise? Does google give free ad space to start ups? Start ups make billions of pounds by advettising on Google? Any help much appreciated...

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Pie

Re: Can anyone explain what ES thinks he might be saying here:

I have been wondering about this as well. Perhaps he is saying without the power of Google adverts all the new UK start ups would fail, but as they can pay Google money to advertise they all flourish and pay tax until they get big enough to work out how not to pay tax...

Hmm, looking at it like that perhaps the government should pay Google to be here...

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Re: Can anyone explain what ES thinks he might be saying here:

Last week I was looking for a magnetic doorstop for external doors. None of the big DIY companies sold them so I found (via Google) and ordered one from a company online, and it was just what I needed. It was obviously a very small company who would never had my business if it weren't for the internet.

So, Google can't take credit for promoting small companies in this way, but they're a big part of the industry that has allowed this to happen. I agree to move from "empowering" to "contributing to the success of" is a big leap, and a little disingenuous.

It's all swings and roundabouts.

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Linux

Re: Can anyone explain what ES thinks he might be saying here:

"It's a line quoted in the BC and Reg versions of the interview, but I honestly don't have a clue what it means... "We empower start-ups through our advertising network" by letting them pay us to advertise? Does google give free ad space to start ups? Start ups make billions of pounds by advettising on Google? Any help much appreciated..." -- It's called marketing-speak and is generally designed to make no sense and have no meaning.

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Anonymous Coward

Re: Can anyone explain what ES thinks he might be saying here:

That's like saying because your ISP gives you the ability to do business online that they should be allowed to dodge tax.

Where does it end? the paper company that lets a business write a letter allows that business to make money so should be allowed to dodge tax?

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Anonymous Coward

Re: Can anyone explain what ES thinks he might be saying here:

"Last week I was looking for a magnetic doorstop for external doors. None of the big DIY companies sold them so I found (via Google) and ordered one from a company online, and it was just what I needed. It was obviously a very small company who would never had my business if it weren't for the internet."

There's the problem with that logic right there, at the end. Google weren't necessary to this story, the internet was. You'd have had the same experience if you used Bing, or Yahoo, or Ask or whatever to search for a supplier of your magnetic doorstops, or you'd looked on ebay.

So even saying Google "empowered" these companies is inaccurate. If Google ceased to exist, these companies would be no more or less empowered.

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Anonymous Coward

Re: Can anyone explain what ES thinks he might be saying here:

Can anyone explain what ES thinks he might be saying here:

"We empower literally billions of pounds of start-ups through our advertising network and so forth,"

He's preparing his political career. Say something which sounds awesome but doesn't mean a thing. (or not even make sense at all)

:-)

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It's not a tax ...

... if you don't have to pay it - it's a donation.

Maybe the people who should be most apologetic about this whole sorry state of affairs are the UK's politicians. The thing they should be apologetic about is their inability to draft water-tight tax laws. Why, after all the years that this has been dragging on, haven't they got off their arses and DONE SOMETHING to close the loopholes?

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