Google, Indonesia Near Tax Deal for $73 Million or Less
November 24 2016 - 4:40AM
Dow Jones News
JAKARTA—Alphabet Inc.'s Google unit is nearing a settlement with
Indonesian tax authorities for no more than $73 million, far less
than Indonesia initially sought, a senior tax official said.
"Consider this tax amnesty for Google," Muhammad Haniv, head of
the tax office's special-cases unit, said in an interview
Wednesday.
If a settlement is reached, Google won't be fined, he said, and
will likely owe no more than 1 trillion rupiah in back taxes. In
September the agency said Google owed up to five trillion rupiah in
2015 taxes and fines, a figure based on data from other government
agencies about digital-ad revenue for the Indonesian market.
Google declined to comment but in the past has said it had paid
all applicable taxes and was cooperating with the government.
President Joko Widodo's government, looking to increase tax
collection to fund his infrastructure program, has targeted
multinational companies. In April, the tax agency said it would
investigate foreign internet companies, alleging they had been
underpaying for years.
In Google's case, tax officials said the company treated its
Indonesian unit as merely a promotional event organizer under the
supervision of Google Asia Pacific, its regional headquarters in
Singapore, which handles all contracts from Indonesian advertisers.
Indonesian authorities assert that Google Asia Pacific pays the
Indonesia unit's expenses and adds 8% that is booked as the unit's
profit. Google has declined to comment.
Google and Facebook collected 70% of Indonesia's total digital
advertising revenue last year of $830 million, Indonesian tax
officials say. Neither company has commented on the figures. In a
joint research report this year with Singapore's state investment
firm Temasek, Google put Indonesia's total digital-ad market in
2015 at $300 million.
While Indonesia is targeting multinationals on taxes, it is
simultaneously wooing foreign investment by deregulating many
sectors.
A tax amnesty rolled out earlier this year has brought in
billions of dollars. And the government has said that it is
considering cutting the corporate tax rate, currently 25%, to as
low as 17%, matching neighboring Singapore. Indonesia's economy is
the largest in Southeast Asia, but Singapore is the popular
regional hub for multinationals.
Google and the tax agency have been meeting since the September
announcement. Google requested but didn't get a meeting with
Finance Minister Sri Mulyani Indrawati, people familiar with the
matter said.
Google in January struck a tax deal with the U.K., agreeing to
pay £ 130 million ($185 million) in back taxes and interest
covering the years 2005 to 2015.
The company is in a nontax dispute with the European Union,
whose antitrust regulator hit it with formal charges in July,
pressing it to change the way it operates in areas including
advertising and shopping. The company has defended its practices.
The EU has also alleged that Google abuses its dominance with its
mobile operating service Android, which the company has denied.
Write to Resty Woro Yuniar at restyworo.yuniar@wsj.com
(END) Dow Jones Newswires
November 24, 2016 04:25 ET (09:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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