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Google to reach tax settlement with Indonesian govt after back tax row

By | 23 November, 2016

GOOGLE is reportedly expected to reach a tax settlement with the government of Indonesia in the next few weeks.

This comes after a senior tax official said the government was looking to chase Google to pay up to five years of back taxes in September. The official added that if it was found that the search mammoth had been avoiding payments, it could face a US$400 million bill for 2015 alone.

Google will pay back all taxes and fines, as well as agree to a new calculation of profits made in the country under the proposed settlement. Analysts say that if the settlement is successful, it could open a door for other countries to aggressively pursue back taxes from Google and other companies like it.

SEE ALSO: E-commerce SMEs face new tax regulation in Indonesia

“I think other countries that have a significant population will also try to chase Google for taxes,” said Yustinus Prastowo, executive director of the Center for Indonesia Taxation Analysis.

Muhammad Haniv, head of special taxpayers at the Finance Ministry, told Bloomberg: “Everyone must comply, whoever they may be. If you refuse to be audited, then we will keep chasing you.”

According to Indonesia’s tax office, most of the revenue generated by Google in Indonesia is booked at its APAC headquarters, based in Singapore.

Indonesia has 250 million people with a sizeable demographic of young people, making it among the world’s biggest user of social media platforms. Senior executives from Google APAC met with Indonesian tax officials a number of times to negotiate the tax bill.

 

The SEA country took a leaf out of Britain’s book – in January, a probe by the British tax authority was settled by Google with US$185 million in back taxes. The probe challenged Google’s reported low tax returns since 2005.

SEE ALSO: Japan: Apple, Google accused of unfair competition practices

Indonesia, which launched a tax amnesty scheme in July to lure back billions of dollars stashed abroad, is eager to ramp up its tax collection to narrow its budget deficit and fund an ambitious infrastructure program.

Other governments around the world are also seeking to clamp down on what they see as egregious corporate tax avoidance. Thailand and Australia also have plans to toughen up on tax collection and tax avoidance.

Additional reporting by Reuters



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