Dec 13 2012

Google boss Eric Schmidt in veiled attack on capitalism

Posted by: Nick Shaxson in: Thoughts

Google boss Eric Schmidt says, when challenged on the firm’s tax avoidance shenanigans:

“I am very proud of the structure that we set up. . . . It’s called capitalism.”

Let’s see, now.

  • Multinationals’ tax avoidance via tax havens corrupts markets, tilting the playing field in their favour.
  • Tax avoidance helps multinationals out-compete their smaller, more locally based rivals on a factor – tax – that has nothing to do with genuine economic efficiency and productivity – and everything to do with extracting wealth from other taxpayers elsewhere, including their competitors.
  • Tax avoidance is effectively a way of extracting tax subsidies that aren’t available to others.
  • As a result of the killing of smaller firms, competition is reduced in the market, and the big become bigger. Oligipolistic and monopolistic market power, and the economic rents that flow from them, increase. Consumers pay more.
  • As a result of all this, inequality is increased, which we now know poses long-term threats to economic stability.
  • Tax avoidance helps multinational firms free ride off societies, helping them take the tax-funded benefits from society then getting others elsewhere to pay for it.
  • Tax avoidance is particularly hard on developing countries, which don’t have the skilled technicians able to counter the devious offshore arguments of the armies of tax advisers that multinationals employ.
  • Navigating the complex seas of tax avoidance costs a fortune in fees paid to these same highly educated tax advisers and lawyers and the whole private infrastructure of tax havens. This is a huge cost to society: efficiency goes out the window.

Eric Schmidt is proud of all of this. This is just capitalism, he says.

He must take a very, very dim view of capitalism. Or he is very confused about it.

Or, most likely, both.

cross-posted with the Tax Justice Network blog.

3 comments so far

Demetrius 12th December, 2012 4.35 pm

Spock: “Jim, this is not capitalism as we know it.” Scotty: “Captain, we’ve lost warp drive.” Is Enterprise doomed by the Google etc. Klingons?

Josephine 1th January, 2013 2.07 am

Google is using tax structuring to avoid taxes … but will people be using Google now less ? Probably not.

Nick Shaxson 1th January, 2013 8.44 am

you’re probably right. starbucks is rather easier to avoid, as is amazon. but google kind of have us by the googlies, I think. yahoo as a search engine doesn’t work well for me.

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