Mr Schmidt said the company's efforts to reduce its tax bill were legal. "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." The company, whose company motto is "Don't be Evil", isn't about to turn down big savings in taxes, he said. "It's called capitalism," he said. "We are proudly capitalistic. I'm not confused about this."

Britain's Business Secretary, Vince Cable, was unimpressed by Mr Schmidt's views and has called on governments around the world to co-ordinate across borders and take on companies including Google and make them pay more tax. "It may well be [capitalism], but it's certainly not the job of government to accommodate it," Mr Cable told reporters in London. "Governments have been very much behind the curve. We operate national systems of enforcement in a world where companies operate on a global scale. On behalf of taxpayers, we've got to retrieve the situation." Mr Cable said he expected the Group of Eight leading industrial economies to work on coordinating tax collection. Asked if Starbucks's announcement that it had decided to voluntarily pay more tax in Britain had put a lid on the issue of avoidance, he said, "absolutely not." The $US9.8 billion of revenues from international subsidiaries which Google swept into Bermuda last year equates to about 80 per cent of its total pre-tax profits.

The documents, filed last month in the Netherlands, show that Britain is Google's second biggest market, generating 11 per cent of its sales, or $US4.1 billion last year. But the company paid just £6 million ($A9 million) in corporation tax. Overall, Google paid a rate of 3.2 per cent on its overseas earnings, despite generating most of its revenues in high-tax jurisdictions in Europe. Bloomberg, Telegraph