Indonesia wants Google to pay five years’ back taxes
20 Sep 2016
Authorities in Indonesia are pushing for the recovery of taxes from Google, the largest operating unit of Alphabet Inc. The internet search giant would need to pay five years of back taxes, amounting to over $400 million for 2015 alone if it was found have avoided tax payments, a senior tax official told Reuters.
Muhammad Hanif, head of the tax office's special cases branch, said its investigators visited the local office of Google in Indonesia yesterday.
According to the tax office, PT Google Indonesia paid less than 0.1 per cent of the total income and value-added taxes it owed last year.
Most of the revenue generated in the country was booked at Google's Asia Pacific headquarters in Singapore. According to Hanif, after Google Asia Pacific declined to be audited in June, the tax office to escalated the case into a criminal one.
"Google's argument is that they just did tax planning," Hanif said. "Tax planning is legal, but aggressive tax planning - to the extent that the country where the revenue is made does not get anything - is not legal."
When asked for a response to Hanif's comments, Google Indonesia reiterated a statement made last week, that said, it continued to cooperate with local authorities and had paid all applicable taxes.
According to commentators, Google was feeling the same headache it had given to many countries; the US giant failed to pay taxes as expected, though it made a fortune in those countries.
Meanwhile, Google Indonesia had been resisting any probe, claiming its local entity did not handle advertising revenues. According to the company ad incomes fell under the auspices of Google's arm in Singapore, a country that offered some of the world's lowest tax rates.
According to commentators, the Indonesian government, like many around the world, resorted to ''tax shaming'' - demonising high-earners who took advantage of perfectly legal opportunities to lower their taxes, although several studies had shown no connection between shaming and making companies pay higher taxes.
