Friday, February 28, 2020
Digital Tax Debates Intensifying in Advanced Countries
S. Korea Remains Passive
Digital Tax Debates Intensifying in Advanced Countries
  • By Jung Suk-yee
  • January 22, 2020, 09:17
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Multinational manufacturers such as smartphone makers and automakers as well as IT companies such as Google and Facebook may be subject to digital taxes.

The United States, Germany and Japan are proactively and systematically responding to the so-called digital tax while South Korea is failing to do so.

Related debates, which are being led by the OECD, boil down to the concept of unified approach, which means multinational manufacturers such as smartphone makers and automakers as well as IT companies such as Google and Facebook must be subject to digital taxes with the authority of taxation lying in countries where their products are consumed and sales are derived.

At present, the debates are being led by G7 countries in particular. The European Union targeted U.S. IT companies earlier, and then the United States resisted and their confrontation expanded. More recently, China is siding with the United States in the power game shaking the very concept of international taxation. “The Chinese government seems to have reached a conclusion that digital taxes limited to IT companies will adversely affect leading Chinese IT companies such as Alibaba and Tencent,” said a South Korean government official.

South Korea is failing to raise its voice in the power game. This is because the debates are revolving around leading countries and the South Korean government is short of personnel to handle the issue. The personnel shortage and the resultant passive response already led to an issue three years ago. At that time, the European Union classified South Korea as a tax avoider by applying its own yardstick different from the OECD’s. Although the European Union canceled the classification later, South Korea’s international reputation was already damaged.