See More on Facebook

Business

Google Korea under tax probe

Critics say it may signal a widening crackdown on foreign tech firms.


Written by

Updated: December 14, 2018

South Korea’s tax agency has launched an investigation into the local branch of US technology giant Google over allegations of tax evasion on the part of some local YouTubers, a move that signals stepped up government efforts to crack down on foreign tech firms long accused of taking a free ride on lax regulations.

The National Tax Service on Wednesday sent its auditors and investigators to the headquarters of Google Korea in Seoul to secure the company’s financial and accounting records.

The NTS has not disclosed the exact cause for the probe, but the investigation is rumored to be centered on suspicions that well-known YouTubers have dodged taxes by not fully reporting income generated by activities on YouTube.

Both the Korean tax agency and Google Korea have declined to comment on the issue.

Investigating high-income YouTubers has been on the agenda for the national tax agency since October, when Commissioner Han Sung-hee hinted at such a move during a parliamentary hearing. Han had also agreed to propositions that an audit is necessary to regulate YouTubers who fail to voluntarily report their earnings with the intention to pay less tax.

The move by the NTS hints at widening efforts by the Korean government strengthen its regulation of foreign information and communication technology companies amid mounting criticism they are not paying the proper taxes while generating massive profits in Korea.

Following in the footsteps of other countries, Korea is working to impose a “Google tax,” or a corporate tax to be levied on foreign tech companies like Google, Facebook, Amazon and Netflix.

In line with this direction, the National Assembly passed a bill last week to amend the Value-Added Tax Act that enforces a 10 percent VAT on online advertisements, cloud computing services and forms of online-to-offline businesses provided as direct-to-consumer services by global ICT firms here.

Previously, the law had required global ICT firms to pay VAT on a limited number of direct-to-consumer services, including sales generated from transactions on mobile app stores like Google Play or Apple’s App Store.

The new bill broadens the type of digital services subject to this tax, to reflect new tech services now generating big profits.

However, only direct-to-consumer sales in these areas are governed by the new tax law. Business-to-business sales are not affected, limiting the scope of the new tax stipulations and its efficacy, critics argue.

Nonetheless, the lawmakers who authored the bill say the change provides a legal basis to broaden discussions on imposing the Google tax.

They also contend it is a step in ensuring that foreign ICT giants running major digital businesses in Korea are held to the same tax policies affecting Korean firms in the same business space.

Fairer tax policies fall under a general framework of establishing a “level playing ground” for foreign and domestic ICT businesses as well — the main agenda at the Ministry of Science and ICT’s parliamentary audit this year as well.

In steps toward this direction, Rep. Byun Jae-il of the ruling Democratic Party of Korea proposed four bills aimed at resolving the claimed “reverse discrimination” problem in Korea’s ICT sector in September.

Among them is an amendment to the Act on Promotion of Information and Communications Network Utilization and Information Protection that mandates foreign internet companies like Google, Facebook and Netflix to install physical servers within Korea in order to operate here.

Byun argues that if passed, the stipulation would mandate foreign ICT firms deliver more stabilized services to Korean users and be governed by the same laws and tax regulations affecting their Korean counterparts.

In Korea, Google is estimated to have raised nearly 4.9 trillion won ($4.6 billion) in revenue last year, according to Lee Tae-hee, a professor of business administration at Kookmin University in Seoul. The figures are based on backtracking the annual earnings report by Alphabet, Google’s holding company.



Enjoyed this story? Share it.


About the Author: ANN’s Board member Mr Zaffar Abbas, Editor of Pakistan’s Dawn has won the 2019 Gwen Ifill Press Freedom Award from the Committee to Protest Journalists.

Eastern Briefings

All you need to know about Asia


Our Eastern Briefings Newsletter presents curated stories from 22 Asian newspapers from South, Southeast and Northeast Asia.

Sign up and stay updated with the latest news.



By providing us with your email address, you agree to our Privacy Policy and Terms of Service.

View Today's Newsletter Here

Business

China pledges international pandemic aid

 Producers of medical goods urged to meet demand from affected countries. China has pledged to do its best to offer aid to countries and international organisations affected by COVID-19 to help contain the outbreak, and businesses are being urged to boost production of epidemic prevention materials to meet demand from abroad. The announcement was made at a meeting of the leading group of China’s coronavirus response, chaired by Premier Li Keqiang on Thursday. Relevant departments and local authorities must step up co-ordination to closely monitor and analyse the quick spread of the outbreak outside China and roll out more targeted measures to prevent the import and export of infection, the group said in a statement. It is important to further


By China Daily
March 13, 2020

Business

Back to work in Beijing, with tough measures in place

 Mandatory quarantine for those coming from overseas; some Wuhan businesses may reopen. As most of China attempts to return to normalcy after an extensive lockdown to curb the spread of the coronavirus, the capital Beijing has been carefully trying to strike a balance between having people restart work while also trying to keep out imported infections, and yesterday ordered a mandatory quarantine for all international arrivals. This comes as the Hubei government announced that some businesses in Wuhan, the outbreak’s epicentre, would gradually be allowed to reopen. On Tuesday, Chinese President Xi Jinping visited Wuhan, his first visit to the city since the outbreak, a sign that the crisis could finally be easing after the government’s toug


By The Straits Times
March 12, 2020

Business

Xi vows victory over coronavirus in Wuhan

President expresses condolences to families of people who died in epidemic. President Xi Jinping said on Tuesday that prevention and control of the novel coronavirus outbreak remains the top priority and most important task, even amid the recent positive signs. Xi, who is also general secretary of the Communist Party of China Central Committee and chairman of the Central Military Commission, made the remark during his inspection tour in the outbreak’s epicentre, Wuhan, capital of Hubei province. The spread of the novel coronavirus has been basically curbed in Hubei and Wuhan, Xi said, adding that initial success has been made in stabilising the situation and turning the tide in Hubei and Wuhan. Xi encouraged local residents and front-line worke


By China Daily
March 11, 2020

Business

China sets example in fighting virus

Epidemic reveals inadequacies in global governance; Beijing says it’s ready to help. China’s response to novel coronavirus pneumonia has set an example for the world in coping with the contagion and offered experience in advancing global public health governance, officials and experts said. The COVID-19 outbreak has also raised the alarm about global public health security and reminded countries that co-operation and co-ordination are needed to deal with challenges as infectious diseases can rapidly escalate into global emergencies, they said. There is a growing positive momentum in epidemic control nationwide thanks to the “comprehensive, thorough and rigorous” measures that China has taken to contain the virus, they said, noting that the daily


By China Daily
March 10, 2020

Business

More than 800,000 people return Beijing under quarantine

“There’s still a risk of an outbreak of the disease with people coming to Beijing from other cities and countries,” Zhang Tongjun, deputy head of a group for prevention and control work in the city’s residential communities, said during an afternoon conference. About 827,000 people who came back to Beijing from outside the city are still in a 14-day quarantine to see if they had been infected with the novel coronavirus, an official said on Friday. “There’s still a risk of an outbreak of the disease with people coming to Beijing from other cities and countries,” Zhang Tongjun, deputy head of a group for prevention and control work in the city’s residential communities, said during an afternoon conference. Z


By China Daily
March 9, 2020

Business

South Korea declares third city as special care zone as cases spike

President Moon receives letter of support from North Korean leader as infected cases cross 6,000. South Korea has declared a third city a “special care zone” to boost its capability to fight a spike in coronavirus infections, with cases nationwide soaring beyond 6,000. The death toll stands at 42, mostly the elderly with underlying health conditions, while 88 people have recovered, including 47 discharged yesterday. The care zone announcement came as the presidential Blue House revealed that South Korean President Moon Jae-in received a letter on Wednesday from North Korean leader Kim Jong Un expressing support and comfort to the people battling the coronavirus outbreak, adding that he is confident they will “prevail in this fight wit


By The Straits Times
March 6, 2020