According to local broadcaster SBS, the Korean arm of Google reported sales of 267.1 billion won ($245 million) to tax authorities last year, much less than its estimated sales of 1.8 trillion won calculated by app analysis firm IGAWorks.
Such a low sales figure may be reported because the revenue generated in Korea -- along with sales generated in other Asian nations -- is sent to Google Asia Pacific, which located in Singapore, considered an Asian tax haven.
Figuring out actual sales generated in Korea is also difficult because Google Korea is not obligated to publicly disclose its sales or taxes here because it is set up as a limited liability company.
Google’s continued opaque business and its growing sales of Google Play in the nation has led to growing calls for more transparent business performance. Sales in Google Play accounts for 71 percent of the total content sales of the app market in Korea this year.
“Because Google Korea does not accurately disclose its service sales, doubts remain over whether the company properly pays taxes,” said Ahn Chang-nam, a professor at Kangnam University’s tax law college.
Globally, some nations have begun to take action to collect “unpaid taxes” from Google. The UK and Italy announced they would recoup 130 million pounds ($174 million) and 360 million euros ($424 million), respectively, in taxes from the search firm.
“Korea should also have legal grounds and join international movements of tackling BEPS to improve its bargaining power with global firms,” said Shin Min-soo, a professor at Hanyang University. Base erosion and profit shifting, or BEPS, refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations.
Setting legal groundwork is ongoing here from both lawmakers and the government. Rep. Kim Sung-tae of the main opposition Liberty Korea Party has proposed a bill to revise the current Telecommunications Business Act to impose the same regulations on global companies as it imposes on local firms.
The government began reviewing how to regulate global companies, including Google, by creating a task force comprised of representatives of the ICT Ministry, Finance Ministry, National Tax Service and Financial Services Commission.
A Google Korea spokesperson said, "Gogle follows the laws and pays all applicable taxes in Korea. Information on Google Korea’s revenue and profit is regularly reported to the Korean tax authority."
By Shin Ji-hye (email@example.com)