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22 April 2013updated 22 Oct 2020 3:55pm

Don’t hate the player… Google just plays it well

You can't blame companies for paying the smallest amount of tax they can.

By Bily Bambrough

 

Does tax avoidance count as evil? Stingy, yes. Tight fisted, certainly. Unfair, perhaps. Illegal, apparently not. But evil is a difficult word to define. Google’s unofficial strap line has always been “Don’t be evil” but this is getting harder and harder to take seriously.

Google’s executive chairman Eric Schmidt has defended his company’s meagre tax on its UK earnings by saying that Google’s behaviour reflected the way all big international companies manage their taxes.

The question of whether our morality is decided by common practise is a question for another day and one with, arguably, no real answer. 

The problem that Google faces is whether or not it should be paying the smallest amount of tax it can. Ask any private person in UK if they would ever voluntarily pay more tax that they are required to do and they probably wouldn’t even understand the question, it’s that daft. You pay what you have to nothing more. Then you claim back everything you can and try and get some tax credits while you’re at it.

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Google is doing the same. The problem here is that Google is having to defend its self when it’s the system that’s broken, not the company. Here’s (a very brief) explanation how Google, and for that matter any of the other multinationals who were criticised for supposed tax dodging, do business within the EU.

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The company (which ever one it is) has offices all over the EU. Each of these offices carries out a particular role for the company. The sales of the company happen within one particular country (in Google’s case from Ireland) and the corporate tax is paid in the country where the sale takes place.

This is how the EU market is meant to work, making it as easy as possible for businesses to sell their products or services around the EU.

Anyone angry at Google for paying this amount of tax in the UK must consider how this legal form of tax avoidance came about. If the system allows for this to happen then it is not the fault of the people or companies within the system when it does. The system has to change; companies (especially multinational corporates) aren’t going to change on their own but will if the laws require them to.

As the saying goes: don’t hate the player, hate the game. Google is just playing it well.