Enjoyment without Responsibility
Online video platform YouTube has become No. 1 app in South Korea as it overtook Kakao Talk in terms of monthly average stay time and Naver App in terms of number of monthly average net users. Based on such market share, YouTube monopolizes nearly 40 percent of the South Korean mobile and video ad market with 40 percent. Accordingly, some market watchers point out that YouTube should be respond to tax issues more responsibly.
According to market research firm Nielson Korean Click on January 4, the number of Youtube’s users in South Korea as of November last year stood at 23.34 million, higher than 21.59 million of Naver App. This is the second highest figures after 29.3 million of Kakao Talk. In short, more than half of South Korean smartphone users use YouTube.
YouTube’s influence can be easily shown in a monthly average stay time. A YouTube user use the app for 822 minutes on average a month, or 30 minutes a day, surpassing Kakao Talk with 797 minutes and Naver App with 654 minutes. In particular, the stay time of YouTube surged to 822 minutes from 581 minutes a year earlier, while that of Kakao Talk and Naver App decreased 50 minutes over the same period.
The share of YouTube in the domestic video ad market is also growing. According to research firm Research Ad, YouTube posted 15.9 billion won (US$14.94 million) in sales in the video ad market in November last year, accounting for 42 percent of 37.8 billion won (US$35.51 million) of the total. Considering a 35 percent market share with monthly sales of 12.5 billion won (US$11.74 million) in November 2016, YouTube showed a remarkable growth in both sales and market share. The industry said that actual sales of YouTube will increase further since it is a Resarch Ad’s estimated figure based on samples.
YouTube made the breakthrough as it has the advantage of the world’s largest video platform and users continuously posted their user-created-contents (UCCs), boosting the number of users. In addition, the amount of data usage increased thanks to the reduction of mobile charges from the expansion of free WiFi and the rise of contract discounts. An official from the portal industry said, “Teenagers today tend to search and learn how to put on makeup and how to play games on YouTube. As more and more teenagers use YouTube, sales of domestic operators, such as Naver and Kakao, are naturally being eaten by YouTube.”
However, there are growing criticism against YouTube about not paying taxes in South Korea despite such influence. In fact, Google Korea CEO John Lee was asked about the revenue in the country at the National Assembly’s audit last year and he said, “We don’t check the sales figures by country.” He indirectly admitted that Google is not paying taxes properly in South Korea. When a company doesn’t know the exact sales figures, it cannot pay taxes accordingly. To be sure, Google and YouTube evading taxes here is not illegal. The National Tax Service doesn’t impose corporate taxes on information technology (IT) service providers operating in South Korea that doesn’t have a server related to the conclusion of a contract or the delivery of products.
The revised Act on External Audit of Stock Companies, which includes limited liability companies, like Google, in the list of external audits, will come into effect at the end of this year but there are concerns that Google can play other tricks to evade taxes again.