Google meets with Indonesian officials over tax bill
Wed 26 Oct 2016
A source with knowledge of the matter revealed that senior executives from Google’s Asia Pacific office met with Indonesian officials to discuss the company’s potential tax obligation in Indonesia.
Google declined to comment on the meeting, but has maintained throughout an ongoing investigation that it continues to cooperate with authorities, and that it has paid all applicable taxes.
Indonesia is currently investigating Google with plans to pursue over five years of back taxes. The government suspects that advertising revenues which were generated in Indonesia were incorrectly booked to Google’s Asia Pacific headquarters in Singapore, resulting in PT Google Indonesia paying less than 0.1 percent of the total income and taxes that it owed last year. Pursuing a full tax remediation could amount in a bill for back taxes of over $400 million for 2015 alone.
Because Singapore has one of the lowest corporate tax rates in the world at 17%, global companies pay far lower taxes by billing revenues in Singapore rather than in the country where the revenue was generated.
In September, officials from the Indonesian tax department raided the office of PT Google in Jakarta after the company refused a tax audit, which escalated the charge from an administrative back tax investigation to charges of criminal tax evasion.
Indonesia has earmarked recovering tax dollars for the country’s infrastructure reforms, and reduction of the national budget deficit.
Earlier this month, Indonesian president Joko Widodo announced that his administration was working on lowering the tax rate and simplifying tax codes with an eye to attracting foreign investment. He said that they were considering lowering the corporate tax rate from the current 25% to 17%, to better compete with Singapore as an attractive Asia Pacific base for global corporations. At the time, Widodo declined to comment on the growing dispute around Google’s back taxes.
This is hardly the first time Google has been accused of underpaying taxes through aggressive tax reduction plans, which often involve billing revenues to countries other than the ones in which the revenue originates. In February, Google agreed to pay $185 million in back taxes in the United Kingdom. The French government is currently investigating a potential $1.7 billion tax bill in their country, resulting in a raid on Google’s Paris office in May of this year.