Tax agency to fight Google in-app purchase policy

National Tax Service Commissioner Kim Dae-ji answers questions from lawmakers during the National Assembly audit at the Government Complex Sejong, Monday. / Yonhap

By Park Jae-hyuk

The tax authority vowed Monday to join pan-government efforts to prevent Google from collecting “unfair profits” in Korea by abusing its monopolistic status with the Android OS.

National Tax Service (NTS) Commissioner Kim Dae-ji told a National Assembly audit Monday that his agency will discuss with other ministries taxing Google's income from fees it seeks to impose on app developers when they sell their content on the Google Play platform.

Google earlier said it will require all app developers on Google Play to use its payment system, which provides the company with a 30-percent cut from in-app purchases. The move will go into effect next year, and the company will exclude all other payment platforms that do not impose such a fee from Google Play.

Google taking the commission is considered unfair to local app developers and downstream users, and so Fair Trade Commission (FTC) Chairwoman Joh Sung-wook said in a separate audit last week that the antitrust agency would investigate the company to see whether it interfered with fair competition.

Korea Communications Commission (KCC) Chairman Han Sang-hyuk also agreed to set up a taskforce with representatives from the Ministry of Science and ICT, the FTC and NTS to investigate Google.

During Monday's audit, the NTS commissioner admitted it has been difficult to tax foreign companies that do not have physical data centers here. However, he added his agency will cooperate with the Ministry of Economy and Finance to correct the system and strictly collect taxes owed.

Over the past few years, Google has been criticized for its apparent attempts to avoid taxes in Korea despite the huge income it earns here.

Data given by the nation's seven card issuers to Rep. Park Kwang-on of the ruling Democratic Party of Korea showed that there have been 2.6 trillion won ($2.2 billion) worth of transactions on Google Play during the first nine months of this year.

The figure stood at 159.8 billion won in 2016, but jumped to 1.9 trillion won last year.

“If Google's payment policy is against the law, the government should introduce countermeasures immediately,” Park said.

In January, the NTS levied 600 billion won on Google Korea in corporate tax.

However, the local unit of the multinational firm filed an appeal with the Tax Tribunal, saying the taxation was unfair because its servers were located overseas. If the tribunal rules in favor of the company, it will be able to get the tax paid refunded.