South Korea To Implement ‘Google Tax’ In Order To Collect Profit Share From International Companies
Android Headlines reported Oct. 20 that South Korea is looking at implementing the Google Tax in 2016 to collect profit shares from international companies that are slyly keeping their profits away from the government.
The Act on International Tax Adjustments, more commonly known as the "Google Tax," is a diverted profits tax targeted to be imposed on company profits that are directed towards tax havens through "contrived arrangements."
"The rest of the world is considering the adoption of the 'Google tax' because they agree tax avoidance must stop," said a Ministry of Strategy and Finance official. "The Korean government is willing to take a preemptive action."
South Korea would be the second country to adopt the diverted profits tax, which is the legislative project of the United Kingdom that also declared an added 25 percent tax on multinationals in 2014.
Last year, Google and Apple reportedly earned 1.6 trillion and 955.8 billion won in sales respectively from South Korea, where they attract most of the mobile content market, but do not pay much tax in, noted Korea Times on Feb. 4.
Rep. Hong Ji Man of the Saenuri Party revised a bill in December that allows corporate taxation on ICT giants worldwide for digital products they sell in Korea.
"By defining IT services as digital goods instead of only considering the location, we can levy tax on their income from creations," said Hong.
Countries who are members of the Organization for Economic Cooperation and Development (OECD) have been discussing ways on dealing with multinational companies' tax evasion. A spokeswoman for Google Korea pointed that the matter should be handled by international organizations.
"As Eric said in his op-ed, when a company only operates in one country, it's easier to determine where its profits are generated and thus where its taxes should be paid," said the spokeswoman. "But for multinational companies with a global presence, it's much more complicated as it requires consideration of cross-jurisdictional tax rules."
"As these are complex and interconnected issues, we believe that International forums like the OECD are precisely the places to decide tax rules for multinational businesses because everyone would benefit from a simpler and more transparent tax system," she added.
Experts are now encouraging international cooperation on monitoring global ICT giants for unjust practices.
