That’s capitalism, says Google chair Schmidt in tax response

GOOGLE’S chairman Eric Schmidt has defended his company against criticism of its tax affairs, saying: “It’s called capitalism”.

“I am very proud of the structure we have set up. We pay lots of taxes; we pay them in the legally prescribed ways,” he told Bloomberg.

Google has been chastised by MPs for funneling $9.8bn (£6bn) of revenue into a Bermuda company, allegedly saving $2bn in taxes last year. Although the company makes more than 10 per cent of its sales in the UK, it paid just £6m in corporation tax last year.

The government has probed the Silicon Valley firm, alongside Starbucks and Amazon, over the issue. Starbucks has offered to pay £20m a year over the next two years, but Schmidt’s comments suggest a similar move from Google is unlikely.

Vince Cable, the business secretary, responded to the former chief executive yesterday.

“It may well be [capitalism] but it’s certainly not the job of government to accommodate it. On behalf of taxpayers we have got to change the situation,” Cable said at a press conference for the Association of British Insurers.

Schmidt also compared the popularity of Google’s Android smartphone software to Microsoft’s dominance of computer software in the 1990s.

“This is a huge platform change; this is of the scale of 20 years ago – Microsoft versus Apple,” he said. “We’re winning that war pretty clearly now.” Android accounted for 72 per cent of worldwide smartphone sales in the third quarter, against Apple’s 14 per cent, according to research firm Gartner. Over 1.3m Android devices are now activated every day.