Indonesia investigating Google for tax avoidance

Google faces an investigation by the Indonesian tax office over allegedly unpaid taxes on billions of dollars worth of advertising revenue.

Accrued over the past five years, the tax payments that Google Indonesia owes for last year alone are believed to total over $400 million. The tax office has claimed that the tech giant’s Indonesian unit has paid less than 0.1% of the income and value-added taxes that it owed for 2015.

Google denied the Indonesian tax authorities access to its tax reports after they requested an examination in April. This prompted the investigation into the company’s tax payments. Google reports most the revenue that it generates from Indonesia at its regional headquarters for Asia-Pacific, based in Singapore.

Finance Minister Mulyani Indrawati issued a statement saying that Google must fall in line with Indonesia’s tax laws. Google Indonesia countered that it has been fully cooperative with local authorities and claims to have paid all required taxes.

Indonesia’s investigation is in line with a global move towards preventing corporate tax avoidance. Major multinational firms such as Apple, Google and Starbucks have all come under fire for using loopholes to dodge sales tax. Muhammad Haniv, who heads up the Indonesian tax office’s branch for special cases, confirmed that other internet companies face investigation over unpaid taxes.

Haniv added that if the investigation concludes that Google has avoided paying tax, it will be fined up to four times the amount owed, meaning its total tax bill for 2015 would hit IDR5.5 trillion ($418 million). He did not speculate at the full amount over the five-year period under investigation.

Mulyani added that there must be a permanent establishment associated with all business conducted in Indonesia, and that by virtue of this all business conducted in the country is subject to taxation. While she acknowledged that this stipulation is complicated by online-only business transactions, the government was working to make sure that tax regulations were obeyed by all companies.

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