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Samsung, LG, Hyundai to pay 'digital tax'
Economy and Finance Ministry Deputy Minister for Tax and Customs Lim Jae-hyeon speaks during a press briefing at Sejong government Complex, Jan. 31. Yonhap
By Lee Kyung-min
Chip industry excluded, impact limited to mobile and home appliance biz
By Lee Kyung-min
Leading businesses here, including Samsung and LG will be subject to “digital tax,” although the impact on Samsung will be limited, as semiconductors accounting for over half the firm's revenue are classified as intermediate goods and therefore exempt, the finance ministry said Friday.
The tentative tax will be imposed in stages amid a global move to require global tech giants among other major businesses to pay taxes in countries where their services are provided.
The imposition of what is often referred to as “Google tax” comes as many governments find it increasingly difficult to levy taxes on online platform operators despite a sharp increase in their economic activities in their countries.
The Ministry of Economy and Finance said a multilateral consultative body participated in by the Organization for Economic Co-operation and Development (OECD) and G20 on the initiative of countering base erosion and profit shifting (BEPS) agreed that governments will be able to tax multinationals on profits generated in their countries.
The OECD/G20 Inclusive Framework (IF) involving 137 countries held a meeting from Jan.27 through 30 (local time) in France.
The results of the deliberations will be revealed at the G20 meeting in February with specifics to be finalized by the end of 2020. Up to three years will be required for the full implementation.
“Korea's Samsung Electronics, LG Electronics and Hyundai Motor will be subject to the tax, mostly in their home appliance and mobile businesses.” a ministry official said.
“But it remains to be seen how they would be granted an exemption status, not to mention the scope and extent of the tax subject to various changes down the road.”
The tax will be levied after taking into account a firm's global and domestic revenue, profit margin in areas subject to the tax and existing tax codes.
The ministry dismissed concerns on double taxation, adding the tax in total paid by businesses around the world will not be raised, meaning firms will not be asked to pay the same tax twice.
“The only difference is which government will collect the tax from a certain firm, with the total amount remaining the same,” the ministry official said.
Public debate on the issue here was fueled here after about one in five foreign entities that posted over 1 trillion won ($839 million) in annual sales here managed to avoid paying corporate taxes over the past five years.
National Tax Service data on foreign corporations' income and tax filings between 2013 and 2017, said 21.8 percent filed “nil returns.” In 2013, of 90 companies, 15, or 16.7 percent, paid no corporate taxes.