Silicon Valley likes to present itself as some hub of boot strapping entrepreneurs, nothing could be further from the truth. The entire economy is built on government subsidies and protection. As Steve Blank notes in his famous presentation The Secret History of Silicon Valley the place would not even exist without the Department of Defense which, in partnership with former World War II intelligence workers at Stanford University, provided the capital and infrastructure for high tech economy. That support continues to this day both from the Pentagon, the National Science Foundation, and a number of other government funders. Companies such as Apple and Google might not exist or certainly not exist in their current highly profitable form without the socializing of risk via taxpayer funded research and development.
Which is why it is incredibly transgressive for Silicon Valley to be such tax cheats. Google’s lucrative algorithm was initially developed through a grant from the National Science Foundation and most of Apple’s technology from Xerox PARC to LCDs to the clickwheel is a result of public investment.
And now Google, Apple, and Amazon have launched a last minute push to once again dodge the tax man.
Silicon Valley has launched a last-ditch attempt to derail plans devised by the G20 group of countries to close down international loopholes that are exploited by the likes of Google, Amazon and Apple to pay less tax in the UK and elsewhere.
The Digital Economy Group, a lobbying group dominated by the leading US digital firms, has written to the OECD, the Paris-based thinktank tasked by G20 leaders with drawing up reforms, saying it is not true that communications advances have allowed multinational groups to game national tax systems.
Yes, you read that correctly, they are actually claiming – despite ample evidence - they are not gaming the tax code unjustly. What are they paying their lawyers and accountants to do then exactly?
But the reason given by Silicon Valley for why it should not be targeted has to be the most hilarious – don’t penalize us for being so good at cheating.
Above all the DEG letter insists international tax rules should not be altered specifically to target digital companies, a move it says would be penalising their operational innovation. “We believe that [digital] enterprises operating long-standing business models, subject to established international tax rules, should not become subject to altered rules on the basis that they have adopted more efficient means of operation.”
The tech sector is all about efficiency and they have efficiently found a way to beat tax regulations better than anyone else – stop punishing success!
In one sense Silicon Valley is correct, they are unrivaled masters at living off the government. They put even the worst stereotypes of welfare recipients to shame. They take massive amounts of money and technology from the government then sell it to consumers at a profit. True innovation.