Google's Schmidt to meet Cameron following tax reform debate

'International tax law could almost certainly benefit from reform,' says Schmidt

Google chairman Eric Schmidt has encouraged the UK government to open up a debate about reforming international tax laws, a week after the firm had been heavily criticised for "doing evil" by the chair of the public accounts committee, Margaret Hodge.

"The UK government has the perfect opportunity to take the lead in shaping this complex debate at the G8 summit next month. We hope George Osborne seizes the initiative and makes meaningful tax reform one of the top items on the agenda," Schmidt wrote in the Observer.

Schmidt defended his firm for only paying £6m in corporation tax on £3.2bn sales in 2011, stating that corporation tax should be paid on a company's profits, not its revenues, and that the amount of profits made in the UK is harder to determine as the company has a global presence.

"This system [of paying more tax in the country where they are based] ensures that the same profits are not taxed twice or even more than that, across different countries, something that would reduce any company's ability to invest in future research or new jobs," he said.

This was the first of three principles that the Google chief "hoped most people could agree upon".

In his second "principle", Schmidt suggested that politicians, not companies, set the rules, and that this leads to a perplexing situation for the public.

"When legislators are doing the lobbying and companies are articulating the law as it stands, it's a confusing spectacle for everyone," he said.

Schmidt's third and final "principle', was one of contrast to his statements in December when he said "we pay lots of taxes; we pay them 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He instead talked up the potential for reform, acknowledging the idea that international tax laws may be outdated, particularly for technology firms like Google.

"Given the intensity of the debate, not just in the UK but also in America and elsewhere, international tax law could almost certainly benefit from reform," he said.

Google's Schmidt to meet Cameron following tax reform debate

'International tax law could almost certainly benefit from reform,' says Schmidt

He added that the Organisation for Economic Co-operation and Development (OECD)'s paper due out in July, which seeks to clarify an action plan, was "hotly awaited", but warned that change would not be easy as it would require further discussions about international tax treaties, not just action by individual states.

Aside from ongoing negotiations for change, he said that if corporation taxes rose globally, the countries may feel that they are the "winners", but in actuality Schmidt believes this would lead to less innovation, less growth and less job creation.

Schmidt is due to meet prime minister David Cameron today, along with business leaders who sit on their business advisory group such as Sir James Dyson, the founder of Dyson, Ratan Tata from Indian outsourcing firm Tata, and Dick Olver, the chairman of BAE Systems, with business tax reform likely to be on the agenda.

Last week, Google denied accusations from MPs that it minimises the amount of tax paid in Britain, claiming that all sales staff operate out of Dublin.

An investigation by Reuters suggested that Google sales staff are in fact based in the UK, while former Google UK workers had told politicians that these sales workers were closing sales in the UK.

Whistleblower Barney Jones told the Sunday Times: "When I was at Google, our job was to find advertisers, to close the deals to get them to sign bits of paper saying they were committing to spending in the UK - if that is not closing the deal, I don't know what is."

Jones plans to hand more than 100,000 emails and documents from his time at Google to HMRC tax inspectors.