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Indonesian Government Officials Claim Google may Face Over $400 Million in Tax Bill for 2015

Indonesian Government Officials Claim Google may Face Over $400 Million in Tax Bill for 2015
If Alphabet Inc's Google is found to have avoided payments, the search giant could face a bill of more than $400 million for 2015 alone in Indonesia as the government there plans to pursue the company for five years of back taxes, reports Reuters citing a senior tax official.
Its investigators went to Google's local office in Indonesia on Monday, Muhammad Haniv, head of the tax office's special cases branch reportedly told Reuters.
Less than 0.1 percent of the total income and value-added taxes it owed last year were paid by PT Google Indonesia, alleges the tax office.
Google Indonesia reiterated a statement made last week in which it said it continues to cooperate with local authorities and has paid all applicable taxes, when asked to respond to Haniv's comments.
Indonesia is eager to fund an ambitious infrastructure program and ramp up tax collection to narrow its budget deficit. The move comes amid such eagerness by the government. On what many other government see as egregious corporate tax avoidance, could force them to seek a clamp down.
Other internet firms would also be pursued by the tax office for back taxes, Haniv added.
Bringing the maximum tax bill to 5.5 trillion rupiah ($418 million) for 2015, Haniv said, Google may have to pay fines of up to four times the amount it owed if found guilty. However he declined to provide an estimate for the five-year period.
Google's Asia Pacific headquarters in Singapore is where most of its revenue generated in the country is booked. He said that the tax office was prompted to escalate the case into a criminal one after Google Asia Pacific declined to be audited in June.
"Google's argument is that they just did tax planning. Tax planning is legal, but aggressive tax planning - to the extent that the country where the revenue is made does not get anything - is not legal," Haniv said.
Haniv said that the tax office is working with the Indonesian police and it will summon directors from Google Indonesia who also hold positions at Google Asia Pacific. A state investigation of corporate tax structures to be escalated into a criminal case is rare even globally.
Crawford Spence, a professor of accounting at Warwick Business School in Britain said that Indonesia's move to pursue Google shows that the international tax tide might be turning.
"In recent decades multinationals have scoured the globe looking for low tax jurisdictions, effectively engaging in rate-shopping as part of tax minimization strategies. Now, with initiatives at the transnational level...countries are starting to develop the confidence to hit back," Spence wrote in an email.
To settle a probe by Britain's tax authority, which had challenged the company's low tax returns for the years since 2005, Google agreed to pay 130 million pounds ($185 million) in back taxes in January.
Yustinus Prastowo, executive director of the Center for Indonesia Taxation Analysis said that as it normally takes at least three years for a court to make a decision on a tax-related criminal case, the Indonesia case is unlikely to be resolved soon.

Christopher J. Mitchell

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