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Possible Unpaid Taxes Puts Google on the Tax Investigation Radar in Indonesia

Possible Unpaid Taxes Puts Google on the Tax Investigation Radar in Indonesia
Quoting a senior finance ministry official of Indonesia on Thursday, media reports indicated that for suspected unpaid taxes from billions of dollars worth of advertising revenue, Indonesia's tax office will investigate Alphabet Inc's Google.
Suspicions were raised about Google after the IT giant refused to cooperate after it was sent a letter in April requesting to be allowed to examine the company's tax reports, said Muhammad Hanif, head of the specials cases branch in the tax office. The probe would not be launched until the end of the month at the earliest, he told a press conference.  
It was complying with the government, said PT Google Indonesia, incorporated in 2011. "We continue to cooperate fully with local authorities and pay all applicable taxes," a Google Indonesia spokesman said in an emailed response to questions.
Tax reports of the Indonesian offices of three other U.S. Internet based companies - Yahoo, Twitter and Facebook have also been asked to be examined by the Indonesian government.
Those three companies have complied, officials said.
While Twitter and Facebook operate branches of their Asia-Pacific offices in Indonesia, Yahoo and Google have formed Indonesian limited liability companies.
The tax office said that income and value added tax on billions of dollars of revenue they generate from advertising in Indonesia is potential owed by these companies to the state exchequer, believes the government.
The taxation base for the Google's Indonesian entity was described to be extremely small and “unfair” by Hanif who also clarified that according to government data only around 4 percent of the total revenues generated from the country was allocated in the name of the Indonesian entity of Google which was very suspicious in the eyes of the taxmen.
The value of digital advertising in Indonesia was about $800 million last year, according to the estimates published by the communications ministry of the country. The ministry said all of it was untaxed.
The wide discrepancy of the two agencies' estimates for digital advertising revenue was not immediately accounted for by any of the agencies.
Since the resource-rich country can no longer rely on commodity-related income, Indonesia is facing a sizable revenue shortfall this year.
After a local newspaper reported that the U.S. car maker Ford Motor Co modified imported Everest model vehicles sold in Indonesia to pay a lower tax rate, the tax office said it is checking whether Ford Motor Co had avoided paying appropriate taxes, an incident that was not linked to the Google case.
According to Indonesian law, Ford may have to pay back taxes of up to four times the amount it owed if the car maker is proven to have caused state losses.
"We have always strictly complied with all Indonesia government regulations and policy, including all import-related tax and customs requirements, related to each of our Ford vehicles officially marketed and sold in the country," a Ford spokesman said.
All operations in Southeast Asia's biggest economy would be closed down by Ford, the company announced in January. Ford had a 1 percent market share in Indonesia.


Christopher J. Mitchell

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