Google Inc (GOOG) Targeted by British PM Over Taxes

Google Inc (NASDAQ:GOOG) has been in the headlines over in the European Union as a poster child for what might be “wrong” with the tax system across the pond, and the mega-corporation is being held up as an example of the relative unfairness of the tax system, as shown by the amount of taxes that such companies have avoided paying the EU. British Prime Minister David Cameron is now the latest high-ranking EU official to speak out, calling for corporations to pay their “fair share” of taxes.

It was reported that Google Inc (NASDAQ:GOOG) did not pay about $1.6 billion in taxes last year, due to incentives that allowed the company to funnel most of its EU revenue through a subsidiary in Bermuda, which significantly cut the company’s tax bill. Cameron wrote a letter to leaders of the other G8 nations, saying he was fed up with the current system.

“I do believe we all have a common interest in being able to tell our taxpayers who work hard and pay their fair share of taxes that we will make sure others do the same,” Cameron wrote. He mentioned that he thought large companies like Google and Starbucks Corporation (NASDAQ:SBUX) are “immorally” mitigating their tax liabilities, adding that loopholes must be closed in an appeal for the G8 to impose tougher tax laws.

As a counterpoint, Matt Brittin of Google Inc (NASDAQ:GOOG) in the UK, said that the company is just following the taxation rules set by the politicians – the very ones to whom Cameron is appealing. Executive Chairman Eric Schmidt said what Google is doing “is called capitalism.”

What else did the Mountain View exec have to say?

“We pay lots of taxes; we pay them in the legally prescribed ways,” Schmidt 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.”

Both Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) have been prominent targets of EU officials in recent years. Apple was recently noted for raking in nearly $10 billion in 2011 revenues in Britain, yet paying an effective tax rate of about 0.15 percent. This was achieved via offshore subsidiaries, in addition to setting up shop in a low-tax EU country.

It’s possible that this latest effort may cause some movement among the G8, but how much is hard to determine. It may just lead companies like Google Inc (NASDAQ:GOOG) and others to change their operational structure in Europe.

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