Cameron hails tax 'turning point' after Google criticisms

image captionDavid Cameron said international action was vital to preventing tax avoidance

David Cameron has called a Europe-wide agreement on tackling tax avoidance as a "turning point", after Google's boss urged politicians to "sort" the system.

EU leaders agreed countries should work together to ensure more transparency.

Earlier, Labour leader Ed Miliband accused internet search giant Google of going to "extraordinary lengths" to avoid paying UK corporation tax.

But executive chairman Eric Schmidt said governments, not firms, were responsible for setting tax policy.

There is growing concern that large multinational companies are not paying their fair share.

At the Brussels meeting, EU leaders agreed that there should be "automatic information exchange between tax authorities" to monitor the situation.

Member states also resolved that governments should share information on who really owns and controls every company.

'Big step forward'

Mr Cameron, who pushed for tax avoidance to be discussed at the meeting, said: "There is real momentum behind the issue to support growth in our economies."

He added: "This is a turning point in breaking down corporate secrecy... This is a big step forward in terms of getting to grips with the issue."

media captionGoogle executive chairman Eric Schmidt: "We completely endorse the idea of having a big debate"

Mr Cameron also said: "There is a real chance to see international action we need to fix the problem. You can't do it on your own. You have to have that international action."

Google, most of whose UK profits are routed through Ireland, is one of the multinationals strongly criticised for organising their tax affairs in ways that minimise the amounts they pay in the UK.

Labour's Mr Miliband said he was "disappointed" the company had contributed just £6m in corporation tax on UK sales of £3.2bn in 2011.

Speaking at Google's own Big Tent event in Hertfordshire, he said the US company's employees expected it to do the "right thing", as its motto was "Don't be evil".

He said: "I can't be the only person who feels deeply disappointed that a great company like Google, with great founding principles, should be reduced to arguing that when it employs thousands of people in Britain, makes billions of pounds in revenue in Britain, it is fair that it should pay just a fraction of 1% of that in tax.

"So when Google does great things, I will praise you... But when Google goes to extraordinary lengths to avoid paying its taxes, I say it's wrong."

'Right thing'

Mr Schmidt, who did not attend Mr Miliband's speech, was later asked about the comments, telling the audience: "I don't think companies should decide what tax policies should be. I think governments should.

"All of us are operating in a very, very longstanding tax regime which was set up for various reasons that don't necessarily make sense to me or anyone else. But they are the way the global tax regime works."

He added: "We are trying to do the right thing. We are not trying to do the wrong thing."

Deputy Prime Minister Nick Clegg has revealed that he did raise Google's tax situation at the Downing Street meeting with Mr Schmidt in a "polite but firm way".

Mr Cameron's spokesman had said the prime minister had not mentioned the issue of Google's tax payments during discussions with Mr Schmidt, a member of the government's business advisory group.

But, asked later about tax avoidance at a press conference following a summit of EU leaders in Brussels, the prime minister said: "I raised the issue very directly."

He added: "I asked Eric Schmidt to comment on that and he did in the meeting. I don't think we're going to solve this if we simply take one company or another company that is registered in Europe, this one in Ireland.

"We are going to solve this. We are going to have proper concrete action."

More on this story