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Mr Schmidt’s comments risk inflaming the row over the amount of tax multinationals pay, after it emerged that Google funnelled $9.8bn (£6.07bn) of revenues from international subsidiaries into Bermuda last year in order to halve its tax bill.

However, Mr Schmidt defended the company’s legitimate tax arrangements. “We pay lots of taxes; we pay them in the legally prescribed ways,” he told Bloomberg. “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.”

“It’s called capitalism,” he said. “We are proudly capitalistic. I’m not confused about this.”

In Britain Vince Cable was unimpressed by Mr Schmidt’s views. The Business Secretary told The Daily Telegraph: “It may well be [capitalism] but it’s certainly not the job of governments to accommodate it.”

A Californian pressure group called Consumer Watchdog wrote to the Senate’s Finance Committee demanding a hearing on Google’s “global tax avoidance strategies”.

Consumer Watchdog’s director John Simpson called for the Committee to schedule a time for Mr Schmidt and Google’s chief executive could “testify under oath and explain their company’s apparent abuse of the tax code to the detriment of all who play fairly.”

Mr Simpson urged the Senate to work with “other countries’ tax authorities” to “put an end to egregious loopholes that allow cynical exploitation by this generation’s Robber Barons.”

“Governments in Europe, many of which have ben targets of Google’s morally bankrupt tax policies, are actively seeking redress,” he wrote. “But this is not a problem that only impacts other countries’ revenues. Google’s tactics strike at the US Treasury as well, forcing the rest of us to make up for the Internet giant’s unwillingness to pay its fair share.”

He added: “What makes Google’s activities so reprehensible is its hypocritical assertion of its corporate motto, ‘Don’t Be Evil’.”

Documents filed last month in the Netherlands show that Britain is Google’s second biggest market generating 11pc of its sales, or $4.1bn last year.

But the company paid just £6m in corporation tax. Overall, Google paid a rate of 3.2pc on its overseas earnings, despite generating most of its revenues in high-tax jurdisdictions in Europe.

The company reportedly uses complex tax schemes called the Double Irish and Dutch Sandwich, which take large royalty payments from international subsidiaries and pay tax in low rate regimes.

By channelling its revenues through Bermuda, Google avoided $2bn of global income levies last year.

The tax arrangements add fuel to accusations made by British MPs that Google and other firms including Starbucks and Amazon, have been “immorally” minimising its tax bills.

Matt Brittin, Google’s UK boss, said MPs were blaming companies for a system that they had designed. “Google plays by the rules set by politicians,” he said. “The only people who really have choices are politicians who set the tax rates.”

Last week, Starbucks caved into public pressure and promised to pay £20m to the Treasury over the next two years. However the trigger more criticism of “optional” tax payments.