Debates Heating Up over Google Tax

The United States reportedly asked the South Korean government not to introduce a so-called ‘Google tax,’ claiming that any server localization attempt targeting global IT companies will be in violation of the KORUS FTA. However, South Korean lawmakers say that server localization and the FTA have nothing to do with each other.
 

The U.S. Embassy in Seoul, the American Law Center of Korea University, and Open Net held a meeting on Nov. 28 to discuss digital sovereignty protection in the Internet.

U.S. Ambassador to the Republic of Korea Harry Harris said at the meeting that free cross-border data flow will bring new possibilities whereas factors hindering it will do more harm than good. He said the U.S. asked the South Korean government not to implement data localization regulations.

The remarks have to do with the attempts by lawmakers to introduce a Google tax, such as Democratic Party lawmaker Byeon Jae-il’s amendment to the Act on Promotion of Information and Communications Network Utilization and Information Protection. The amendment requires global IT companies like Google and Facebook to have their servers in South Korea. The amendment is designed to address the current situation in which Google’s annual sales in South Korea amount to five trillion won but its annual tax burden is limited to 20 billion won or so.

Brookings Institute senior fellow Joshua Meltzer said data localization will turn the globalized Internet into a balkanized one, and then more costs will be incurred and the burden will be shifted to consumers.

“It can be said for sure that a bill for server localization can be in violation of the KORUS FTA,” said Open Net lawyer Kim Ga-yeon, adding, “South Korea is in pursuit of free trade and server localization is directly against it.”

Former Kyung Hee University Law School professor Park Hwon-il noted that the data traffic localization and violation penalties stipulated in the amendment are totally unprecedented worldwide.

The Democratic Party lawmaker said in response that server localization is not in violation of the duty of residence according to the KORUS FTA, explaining the duty is applied only to personnel.

“South Korean companies in the industry are suffering reverse discrimination, and taxation in proportion to profits is one of the most basic rules for fair competition,” said an industry executive.