Google is “flying a banner of doing no evil, and then they’re perpetrating evil under our noses,” said Abraham J. Briloff, a professor emeritus of accounting at Baruch College in New York who has examined Google’s tax disclosures.
“Who is it that paid for the underlying concept on which they built these billions of dollars of revenues?” Briloff said. “It was paid for by the United States citizenry.”
The U.S. National Science Foundation funded the mid-1990s research at Stanford University that helped lead to Google’s creation. Taxpayers also paid for a scholarship for the company’s cofounder, Sergey Brin, while he worked on that research. Google now has a stock market value of $194.2 billion.
I would have thought that Google had repaid many, many times any burden that individuals had imposed on the taxpayer. Both through taxation and through the benefits that Google has provided. In any event the NSF either has property rights in Google or it does not. Based on the story it looks like it does not.
I’m far more interested in the territorial v worldwide taxation aspects of the story. Worldwide tax systems are IMHO an abuse of globalisation and sovereignity. Australia, for example, taxes its tax residents on their worldwide income while the US taxes its citizens on their worldwide income (its a bit more complicated, but that captures the broad policy intent). Governments are expanding their powers beyond their own borders and so undermine the benefits of international policy diversification. Political power should be severely constrained and one obvious way to do so is to contain it within territorial boundaries.
Second last word to Dan Mitchell
This is a matter of sovereignty and good tax policy. From a sovereignty persepective, if income is earned in Ireland, the Irish government should decide how and when that income is taxed. The same is true for income in Bermuda and the Netherlands.
From a tax policy perspective, the right approach is “territorial” taxation, which is the common-sense notion of only taxing activity inside national borders. It’s no coincidence that all pro-growth tax reform plans, such as the flat tax and national sales tax, use this approach.
Of course the revenue lobby will complain that this makes it easier for ‘the rich’ to avoid tax and people will engage in schemes to reclassify domestic sourced income into foreign sourced income and so on. The solution to that ‘problem’ is easy – cut tax rates. Cut spending while you’re at it.