Google's executive chairman Eric Schmidt has said he is "perplexed" by the ongoing debate over the company's tax contributions in the UK. Mr Schmidt told the BBC that the company did what was "legally required" to pay the right amount of taxes. Google paid £10 million in UK corporate taxes between 2006 and 2011, despite revenues of £11.9 billion.
I say despite, not on, because we all know that corporation tax is payable on profits, not revenues, or to be more precise it is a tax on the taxable profits of limited companies and clubs, societies, associations, co-operatives, charities and other unincorporated bodies. Taxable profits for corporation tax include trading profits, investment profits and capital gains. Companies within the charge to corporation tax include foreign registered companies that are resident in the UK, usually by virtue of their management and control, and foreign companies that carry on a trade in the UK through a permanent establishment.
Now Mr Schmidt may try to sound "perplexed", but the reality is that it is quite tricky to fall outside the scope of corporation tax, unless you really want to. That is not to say that it is impossible to do so, but that if anybody has UK sourced revenues of £11.9 billion, a permanent office in the UK from which sales and marketing take place then they had probably take a bit of advice from their lawyers and accountants.
Make that a lot of advice from their lawyers and accountants, which is going to cost a fair bit and someone has to approve the bills. Which is why you're fooling no-one, Mr Schmidt.
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