South Korea Joins 94 Countries Enacting ‘Google Tax’
Google is said to have evaded paying an estimated $1.3 billion earned from selling apps in Korea based on the argument that their server is based in Ireland.
The so called ‘Google Tax’, also known as the Base Erosion & Profit Shifting (BEPS) regulation, has been adopted this week by ninety-five countries around the world. Korea announced today that it too will kick in the regulations starting in 2016.
Of the 95 countries, leaders of the world’s 20 largest economies have endorsed the OECD proposed global standards to reduce tax evasion by multinational enterprises.
ACCORDING TO THE KOREAN GOVERNMENT 4,752 OUT OF 9,532 FOREIGN COMPANIES FAILED TO PAY CORPORATE INCOME TAXES IN 2013.
The announcement comes following a Monday meeting in Antalya, Turkey of the leaders of the Group of 20 that concluded to take action against tax evasion.
The BEPS is designed to punish multinational tech firms such as Google, Amazon, Apple and Facebook –all who have been criticized for shifting profits earned in countries with high tax rates to countries with lower tax rates.
The OECD estimates that total government revenue losses from tax evasion to be somewhere between $100 billion and $240 billion annually worldwide.
It is difficult for governments to know the profit structures of foreign companies since there is no regulation or duty to report or audit.
The Korean government says that 4,752 out of 9,532 foreign companies failed to pay corporate income taxes in 2013 –with Google said to have evaded paying an estimated $1.3 billion earned from selling apps in Korea based on the argument that their server is based in Ireland.
“As technology advances, it has become easier for IT companies to evade taxes,” an official from Finance Ministry told the Joongang Daily.
“Borders mean nothing to them, as they’ve become able to hide their assets here and there to evade taxes. It is difficult for governments to know the profit structures of foreign companies since there is no regulation or duty to report or audit.”
The Korean Finance Ministry said it will comply with four minimum standards of the final BEPS report approved by the G-20, which are mandatory for all 94 countries that joined.
“The BEPS project…is expected to help enhance our ability to tax cross-border companies including Google and Apple,” said Choi Kyung-hwan, deputy prime minister for the economy.
