Korea to impose 'Google tax' on multinational firms

By Lee Min-hyung

The government is in an all-out war to stop multinational corporations from artificially shifting profits to low or no-tax locations, mandating them to submit country-by-country tax reports.

The Ministry of Strategy and Finance on Thursday announced its proposed tax revision, outlining that international companies here should notify the nation’s tax regulator of their income taxes for each country they operate in.

The aggressive and wider range of tax revision is aimed particularly at global IT giants ― such as Google and Microsoft ― which have been at the center of a series of controversies here over their suspected tax evasion.

The ministry plans to receive the reports ― which include details of the companies’ income taxes and sales by country ― no later than the end of next year and share the relevant tax information with other countries, as part of its cross-border bid to prevent the companies from using tax havens.

The move reflects the government's bid to be in line with the Base Erosion and Profit Shifting (BEPS) project.

Google Korea said it will maintain its previous position in its tax-related dispute here.

“Google Korea has always complied with tax rules in all the countries where we operate, and will follow new rules to be implemented,” a Google Korea spokeswoman said.

Reverse discrimination on overseas firms?

Google’s local counterparts ― such as Naver ― have expressed frustration over the government’s failure to determine the issue in a more transparent and active way.

“Nothing is unveiled over how much Google or Apple reaps profits here from their app stores,” Naver founder and chairman Lee Hae-jin, said at a recent press conference. Naver is the nation’s top portal operator. His remarks reflect that Google should also be under the same regulations as Naver.

“Things are no different for YouTube or Facebook. If Google can establish its own data center here, all the tax-related issues may be put to an end,” he said.

Google Korea, however, said the company has to consider various factors ― including local infrastructure and experienced manpower to manage the facility ― before establishing a data center here. But the nation has yet to meet its standard over the plan, according to the company.

Kwon Beom-joon, software engineer at Google Korea, said: “Google is fully complying with not just the Korean tax system, but that of other countries where it operates its business.

“We take a very comprehensive approach over the establishment of data centers before making our final decision. They include how stable the local technology infrastructure is and whether the nation has a reasonable regulatory system.”