South Korean government eyes new Google Tax for next year

One of the challenges that is confronting governments around the world is how to deal with increasing globalization and companies that are no longer primarily confined to operating within one country or even one region of the world. More and more, companies like Google, Apple, Samsung and others are becoming major industries in all markets where they operate. Even though they operate in many countries, often generating significant revenues in those markets, they are often sophisticated enough to take advantage of existing tax laws to greatly minimize the taxes they may pay in any given jurisdiction. The G20 plans to take up this issue next month at a meeting in Turkey, but South Korea appears to be ready to implement new tax provisions a year earlier than what the G20 is looking at by moving forward with the so-called “Google Tax” starting in 2016.

To demonstrate the challenge for national governments, in South Korea in 2013 there were 90 companies that generated more than 1 trillion won (approximately $889 million USD) in sales. Out of those 90 companies, 15 of them paid no taxes for 2013. South Korea also had 9,532 overseas corporations conducting business in the country in 2013 and 49.9 percent, or 4,752 of them, did not pay any corporate taxes.

The avoidance of taxes is part of a set of strategies that multinational companies engage in to minimize their tax burden that are called BEPS for Base Erosion and Profit Sharing. The Organisation for Economic Co-operation and Development (OECD) estimates countries that belong to OECD missed out on $240 Billion USD in tax revenues due to these multinational companies successfully navigating the international tax requirements.

According to a statement from the South Korean Ministry of Planning and Finance, “If Google tax is a worldwide trend, the Korean government will implement the system preemptively. We will implement it earlier, check problems, and make improvements.” The “Google Tax” is slated to be considered at the G20 Summit in Turkey next month after the G20 Financial Ministers Meeting last month in Peru approved the basic set of countermeasures against BEPS and provided their rationalization for the recommended steps. If approved, the G20 countries are expected to introduce and implement the Google Tax in 2017. South Korea’s move will get it moving on the Google Tax one year earlier than the other G20 countries.

source: BusinessKorea

Come comment on this article: South Korean government eyes new Google Tax for next year