Claims have emerged that Google Korea’s revenue for the previous year is up to 30 times higher than what was disclosed in its audit report. Taking into account the omitted revenue in the audit report, it is suggested that the corporate tax owed to the South Korean government by Google Korea could be as much as 26 times higher.
On Oct. 5, Professor Kang Hyung-gu from Hanyang University Business School delivered research findings on the topic of “Estimating the Domestic Revenue and Corporate Tax of Foreign Platform Companies” at the annual academic seminar of the Korean Financial Management Association held at Seoul National University. Kang stated, “Last year, Google Korea’s revenue is estimated to be 10.5 trillion won (US$7.76 billion), which is up to 30 times higher than the 344.9 billion won reported in the audit report. The corporate tax owed to the South Korean government is also as high as 442 billion won, which is 26 times higher than the actual payment of 16.9 billion won.
Professor Kang estimated Google Korea’s revenue and corporate tax for 2021 first and then divided the estimated figures for 2022 into three scenarios. These scenarios considered a 3.3 percent growth rate in the information technology (IT) industry for 2022, a 2.6 percent growth rate in the domestic economy, and a 17.96 percent growth rate in Google Korea’s operating income, all applied to the 2021 estimates.
The estimates for 2021 were quoted from a research paper titled “The Impact of Global Platforms on the Domestic Economy,” co-authored by Professor Kang earlier this year. According to this paper, Google Korea’s revenue for 2021 was estimated to be between 4 and 9 trillion won with corporate tax estimated to be between 390.6 and 913.1 billion won. It is pointed out that the actual reported revenue of 290 billion won and corporate tax of 13 billion won by Google Korea are significantly lower than these estimates.
There are suggestions that Google Korea’s revenue may be much higher than what appears on paper due to revenue streams not captured in the reported figures. For instance, Google reports its income and pays taxes for its app business in the Asia region in Singapore. This is because Google Play, the app store, has its servers located in Singapore.
If Kang’s estimates are accurate, Google Korea’s revenue for 2022 would surpass Naver’s 8.22 trillion won, and its corporate tax would exceed Kakao’s 241.8 billion won. Professor Kang emphasized, “Google Korea’s revenue and corporate tax are higher than those of South Korea’s largest platform companies, yet the reported revenue and corporate tax in the audit report are at the level of small and medium-sized enterprises.”
Experts who attended the seminar on that day agreed that “the realization of fair taxation for foreign giant platform companies has not been achieved.” Professor Kim Woo-jin of Seoul National University Business School commented, “Google’s influence in South Korea is greater than that of any domestic IT company, but we don’t even have a proper understanding of how much it earns in the domestic market. Before discussing regulations, understanding the market is essential, and this is lacking.”
Professor Yoo Byung-jun from Seoul National University Business School stated, “Google Korea’s key businesses like YouTube and search engines already dominate domestic companies in terms of market share. Establishing economic order through fair taxation is essential for enabling fair competition with domestic platform companies.”