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‘deeply unethical and tax avoiding’ - Google is Evil

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« on: January 09, 2011, 04:39:06 am »

Ex C4 boss’s vitriolic onslaught on ‘deeply unethical and tax avoiding’ web giant Google

By Lawrie Holmes
Last updated at 12:53 AM on 9th January 2011

The former head of Channel 4 has launched an astonishing attack on Google, branding it a ‘monstrous’ parasite that should be broken up.

Luke Johnson, one of Britain’s best-known entrepreneurs, accused the ‘arrogant’ internet giant of acting unethically by avoiding tax and attacked its ‘cosy relationship’ with the Government.

Mr Johnson said Google, which has the corporate motto ‘don’t be evil’, exploits loopholes to keep the corporation tax it pays on its vast earnings outside the US at exceptionally low levels.

By dominating web advertising, the company, which has its European base in Ireland, also siphons off revenue that once supported quality content in television and newspapers, he said.

Mr Johnson said the admiration for Google displayed by Government Ministers such as Chancellor George Osborne was ‘deeply misjudged’ and that the company should be broken up.

He also said Google invaded privacy and called Street View, its archive of street-level photographs, ‘monstrous’.

In October, Google reported net income of £1.4 billion for the third quarter of 2010.

According to Bloomberg, Google’s non-US tax rate has averaged just 2.4 per cent over the past three years. The main rate of corporation tax rate in Ireland is 12.5 per cent, while in the UK it is 27 per cent.

John Christiensen, director of the Tax Justice Network, echoed Mr Johnson’s comments, saying: ‘Google is pushing the tax position to the max to avoid paying tax. If any company wants to claim the ethical high-ground, it needs to be tested on this.’

Previously, Business Secretary Vince Cable said: ‘We are plagued with the problem of companies based in Ireland to avoid tax.’

A Google spokesman said the company ‘complies completely’ with the tax laws of the countries in which it operates. ‘As a result, we make a very substantial contribution to taxation and provide employment for around 1,000 people in the UK.’

Mr Johnson made his fortune with restaurant chains, including Pizza Express and Signature. He was made chairman of Channel 4 in 2004 but stepped down last January.

Since 2001, he has run private equity firm Risk Capital Partners Ltd.

Why the Tories are so wrong to cosy up to this parasite

By Luke Johnson

Former chairman of Channel 4

Read more:

Google has a corporate philosophy that states: ‘You can make money without being evil.’

Google may not be evil, but I think it is perhaps the worst corporate citizen I know.

Its whole attitude is one of overwhelming arrogance, typical of the megalomania that accompanies a business possessing an unbearable monopoly.

Let me give you one huge example. Google has paid just 2.4 per cent corporation taxes on its overseas earnings of £7.2 billion since 2007, according to Business Week.

It exploits tax havens such as Bermuda to legally avoid taxation. In Britain, easily its second-largest market, in the past three years it has generated approximately £5.7 billion in revenues.

The vast majority of those revenues will be profit – net margins are likely to be well above 30 per cent – because its true cost of sales is so low.

But that is not what Google reported in its company statements.

Effectively, Google invests negligible amounts in Britain, pays negligible amounts of tax on its underlying surplus to contribute to civil society, and yet extracts vast sums in advertising revenues.

The tragedy is that those advertising revenues siphoned off to California should be
used to help fund high-quality content – TV programmes, radio shows, newspaper and magazine articles.

But now commercial tele¬vision and radio stations, as well as the print media, are seeing their economic model threatened by Google, whose search engine dominates web advertising.

Essentially, Google pays for no content whatsoever, but parasitically lives off the back of all those organisations that actually commission writers, actors, directors, producers to make original material.

All those film-makers, journalists and others who are being thrown out of work can blame Google: they have ransacked the UK media industry, and are not even paying reasonable levels of tax on their usurious gains.

Britain punches way above its weight in the entertainment and culture industries – but
we are also easily the biggest loser from Google’s assault, since none of the cash it extracts is recycled in any serious way in creative content.

Google is, I believe, profoundly unethical in other ways. Its philosophy over its invasions of privacy, such as Street View, its insistence on taking pictures of every street in Britain and posting them on the web – is monstrous.

Eric Schmidt, its chairman and CEO, appears to feel he is on a mission from God in trying to obtain almost unlimited amounts of private information from ordinary citizens.

He has said: ‘If you have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.’

Another of his recent remarks is: ‘Google policy is to get up to the creepy line and not cross it.’

Anyone who uses any Google services such as Gmail and its search engine should be aware that they store data derived from your use for years.

Gmail’s software even reads your private emails so that Google can bombard you with advertisements that match your interests.

An extraordinary article appeared in the Daily Telegraph on November 3. The column said little, but the authorship was revealing.

It was jointly written by George Osborne, Chancellor of the Exchequer, and Eric Schmidt.

It suggested there was a cosy relationship between the two, and that our Government greatly admires Google.

Given how little corporation tax Google pays in Britain, given how its profits directly damage the competitiveness of our creative industries, given how it flouts privacy and copyright concerns, I thought it was a deeply misjudged alignment.

Cynically, I wonder if this puff piece had anything to do with the fact that Steve Hilton, eminence grise of the Tory high command, is married to Rachel Whetstone, vice-president, public policy and com¬munications at Google.

Others in public office are less impressed. I am delighted to see the European Commission is undertaking an anti-trust inquiry into possible abuse by Google of its 80 per cent share of the European online search market.

Just as Rockefeller’s Standard Oil was an oppressive enterprise that became so powerful it had to be broken up for the public good – so I believe Google must be seriously tackled in the national interest.

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