Google Chairman Eric Schmidt Defends Tax Dodge: 'It's Called Capitalism'

Google Chairman Eric Schmidt Defends Tax Dodge: 'It's Called Capitalism'

Google's chairman says he is "proud" of the way his company avoids paying taxes.

"It's called capitalism," Eric Schmidt told Bloomberg in a Wednesday article. "We are proudly capitalistic. I'm not confused about this."

"We pay lots of taxes; we pay them in the legally prescribed ways," he said. "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."

Bloomberg reported on Monday that Google avoided paying $2 billion in global income taxes last year by housing profits in Bermuda, which has no corporate income tax. Google already had been paying a 2.4 percent overseas tax rate through tax avoidance strategies, according to a 2010 Bloomberg report. Its overall effective tax rate was 22.2 percent in 2009.

Google could not be reached for comment.

Google's effective U.S. tax rate is unclear. Citizens for Tax Justice did not analyze Google in a 2011 study because Google reports most of its profits as foreign, even though that may not be true.

Other big companies have avoided taxes by shifting revenue abroad. Boeing, DuPont, Capital One and General Electric paid a negative effective U.S. tax rate in 2010, according to Citizens for Tax Justice. Apple paid a total effective tax rate of just 9.8 percent last year, according to The New York Times.

The U.S. government has been struggling to balance its budget; its annual deficit is projected to be $1.1 trillion this year. But taxing companies more is not really on the table. Both the Obama administration and congressional Republicans have proposed cutting the corporate tax rate.

Google is a member of the Silicon Valley Leadership Group's Tax Policy Committee, which advocates for tax reform. The group says on its website that California should "lower overall tax burdens" and give companies "tax-based incentives."

(Hat tip: the Telegraph.)

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