Indonesia rejects Google tax settlement deal as ‘too small’, continues investigations

THERE has been recent drama and ambiguity as to how global tech firms will be taxed in foreign markets. In the case of Google and its operations in Indonesia, the local government has been looking to tax global tech companies, such as Facebook, on digital ad revenue. A month ago, as reported by the Wall Street Journal, it would seem that Google’s tax bill would be settled “for US$73 million or less“.

This is now no longer the case as Indonesian tax authorities are now requiring the search giant to offer a larger amount. To put this into perspective, the Southeast Asian country initially hoped Google would offer a cool US$400 million.

It’s a complicated matter as both parties are at odds in terms of how to calculate an adequate tax offering for Google’s ad revenues. As reported by Tech in Asia, Google’s Asia-Pacific revenue is mostly billed through its Singapore regional HQ. While Google believes that it has complied with Indonesia’s tax requirements, the Indonesian government feels that since Google is drawing ad revenue from Indonesian users – it should also pay taxes there.

SEE ALSO: Thailand mulls stricter taxation rules for tech firms in future

Muhammad Haniv, the lead investigator for the Google-Indonesia tax case, told Reuters: “Because we couldn’t reach a settlement, the investigation continues. Now we want Google to open its books and the tax office will calculate the tax owed,” he said. Google appears to be in compliance with this request, as Haniv notes that the search giant had asked for a grace period to get its accounts in order.

Google hasn’t just had conflict with Indonesian tax authorities, as it has also clashed with the UK government where the tech giant had to fork over US$185 million in a settlement.

And the search giant is not alone in its tax woes as Apple has also been appealing against a much steeper bill. The EU had demanded that Apple cough up a whopping US$14 billion due to a “sweetheart deal” with the Irish government which had made the smartphone maker privy to “illegal subsidies”.

Sickening to realize that Apple and other giant US companies will soon be rewarded for their epic, fundamentally unpatriotic tax-dodging…

— Dan Gillmor (@dangillmor) December 9, 2016

Tax demands from a foreign market can be a complicated situation as often times, it is seen as vengeful siphoning from a company’s home market.

According to Reuters: “The Obama administration also voiced displeasure at what it said was the EU helping itself to cash that should have ended up in the U.S. while many in Silicon Valley saw it as further proof of an envious Europe, having lost out on new tech markets, is trying to rig regulations against them.”

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