Google’s executive chairman, Eric Schmidt, has defended his company paying just £6m in UK corporation tax, saying the firm was playing a key role in the UK’s high-tech growth.
Listen to an excerpt from the BBC radio interview below:
Back in 2011, Google paid just £6m in corporation tax in 2011, but speaking to the BBC this week Schmidt said the arrangements “fully comply with the law” and it was acting in the same way as other firms.
The tax arrangements of multinational firms including Google were heavily criticised by MPs in a scathing report earlier this year.
The Public Accounts Committee accused Google, Starbucks and Amazon of “using the letter of tax laws both nationally and internationally to immorally minimise their tax obligations”.
Asked about the £6 million tax bill on BBC Radio 4’s World at One Mr Schmidt said: “Of course that omits the fact that we also hire more than 2,000 employees and are investing heavily in Britain.
Job creation trumps tax avoidance?
In the interview with BBC Radio 4’s The World at One programme, Schmidt said his firm invested heavily in the UK and its services boost the economy.
He conceded that “Britain has been a very good market for us. We empower literally billions of pounds of start-ups through our advertising network and so forth. And we’re a key part of the electronic commerce expansion of Britain, which is driving a lot of economic growth for the country.”
He added that Google’s behaviour reflected the way all big international companies manage their taxes.
“The same is true for British firms operating in the US, for example,” he said. “I think the most important thing to say about our taxes is that we fully comply with the law and we’ll obviously, should the law change, we’ll comply with that as well.”
23% revenue rise
Schmidt’s comments as Google posted its first quarter results for 2013. The internet giant’s core web business grew net revenue 23% in the first quarter, softening the effect of a sharp decline in its Motorola mobile phone division.
Shares of Google, which reached an all-time high of $844 (552.28 pounds) in March, were up 1.5 percent to $777.75 in after hours trading.
Google’s adjusted profit of $11.58 per share benefited from a significantly lower tax rate due to a retroactive research and development tax credit. Without that benefit, Google would have missed Wall Street’s earnings target of $10.66 per share.
Google improved its cost-per-click, a critical metric that refers to the price advertisers pay the Internet search giant, in the first quarter. The CPC rate declined 4% year-on-year in the first quarter, versus a 6% decline in the fourth quarter.
Google CEO Larry Page spent much of the conference call discussing new products such as the Google Glass wearable computers and high-speed fiber networks that the company is developing, which he said were vital to the company’s future success.
“If you look at most companies they never do anything different, and eventually they run into problems for that reason,” said the 40-year-old Page, who co-founded Google in 1998 with Sergey Brin.
He said the new lineup of yet-to-be-released Motorola devices would offer a variety of improvements over current smartphones, with features such as longer battery life and better resistance to shattering or damage from spilled drinks.
Revenue at the Motorola business, which Google acquired for $12.5 billion in May 2012, declined to $1.02 billion in the first three months of the year, from $1.51 billion in the fourth quarter. The Motorola business posted an operating loss of $271 million in the first quarter.
Google’s main Internet business generated $9.99 billion in first-quarter net revenue, which excludes fees paid to partner websites, compared to $8.14 billion in the first quarter of 2012.
Search ad rates under pressure
Google’s search ad rates have been under pressure as more consumers access its online services on mobile devices such as smartphones and tablets, where advertising rates are lower than on PCs.
In February, Google changed the way marketers run ad campaigns on Google, blurring the distinction between ads destined for PCs and mobile ads, in a move that some analysts believe could help bolster Google’s overall ad prices.
Google also recently converted its shopping search feature to an all-advertising based system, in which retailers are required to buy ads featuring photos of their products in order to be included in the search results. More than one billion products are now listed, Google Chief Business Officer Nikesh Arora said during the conference call.
Overall first quarter net income, including its money-losing Motorola Mobility mobile phone business, was $3.35 billion or $9.94 per share. That compares with net income of $2.89 billion or $8.75 per share in the year-ago period, before Google acquired Motorola.
Consolidated revenue in the first quarter was $13.97 billion, versus $10.65 billion in the year-ago period.