Korea is moving to impose taxes on foreign ICT giants such as Google, Apple, and Facebook.
To this end, Ruling Saenuri Party lawmaker Hong Ji-man tabled revisions to the Income Tax Act and the Corporate Tax Act in December last year. Dubbed the Google Tax Act, the bills are to be discussed at the plenary session of the Strategy and Finance Committee of the National Assembly scheduled for Feb. 5. The purpose of the bills is to levy taxes on the companies’ income generated domestically from their computer program copyrights.
In the meantime, the Fair Trade Commission recently announced that it would more closely monitor the companies in the mobile industry by organizing a dedicated task force. Also, applications on app markets like Google Play and the Apple App Store will be subject to a value added tax of 10 percent from July this year, according to the Tax Act revised last year.
Presently, the foreign ICT giants are estimated to record over one trillion won in annual sales in Korea. According to the Korea Mobile Internet Business Association, Google and Apple posted sales of 1.5930 trillion won (US$1.4692 billion) and 955.8 billion won (US$878.9 million) in 2013, respectively. Still, they pay almost no tax in Korea and have registered themselves as limited liability companies, meaning they do not have to disclose their exact sales and profits.
In contrast, Korean Internet service providers like Naver and Daum Kakao have to disclose sales and pay taxes. Experts have pointed out that reverse discrimination could hinder the growth of domestic ICT companies, with their foreign rivals continuing to increase their presence.
The so-called Google tax is being discussed in many other countries like Britain, Spain, Australia, and Japan. In addition, OECD member countries are currently moving ahead with the Base Erosion and Profit Shifting Project so as to prevent multinational corporations from avoiding taxes.