Taxing Google
As early as next year, the Korean government will introduce the so-called “Google Tax” that precludes multinational companies such as Google, Apple and Amazon from evading taxes. If put into practice as planned, the new tax system will be implemented in Korea one year earlier than G20 countries. The government’s introduction of the Google Tax aims to collecting more tax money.
Multinational companies have evaded taxes through countering base erosion and Base Erosion and Profit Shifting (BEPS). Last year, the OECD estimated that BEPS cost member countries up to US$240 billion.
In Korea, 4,752 of 9,532 overseas corporations of foreign companies, or 49.9 percent, paid no corporate taxes in 2013. In particular, 15 of 90 companies which posted 1 trillion won (US$889 million) or more in sales did not pay any taxes. “If Google tax is a worldwide trend, the Korean government will implement the system preemptively,” said a representative at the Ministry of Planning and Finance. “We will implement it earlier, check problems, and make improvements.”
According to the ministry, last month, the government submitted a revised draft of the Act on International Tax Adjustment, which makes it compulsory for multinational companies to generate international trade information reports. The current Act on International Tax Adjustment demands that tax payers with international trade with foreign companies hand in international trade statements. The revised draft demands the same thing from multinational companies.
The Ministry of Planning and Finance is planning to make enforcement decrees and enforcement regulations within this year. In this case, multinational companies ought to submit general international trade information reports when they report their corporate tax in 2017. G20 countries are expected to introduce a Google Tax in 2017. The G20 Financial Ministers Meeting held in Peru early this month approved countermeasures against BEPS, which is the basic reason for the introduction of the Google Tax.
The G20 will confirm this content at the G20 Summit that will be held in Turkey next month.
When introduced, the Google Tax will also affect Korean global companies, too. The Korean government will reflect the results of the G20 Summit in a revised 2016 draft that will be made public in Aug. of next year, and make improvements to Google tax that will be introduced one year earlier than leading countries.