Indonesia to investigate
Google over possible unpaid taxes
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[September 15, 2016]
By Gayatri Suroyo
JAKARTA (Reuters) - Indonesia's tax
office will investigate Alphabet Inc's Google for suspected unpaid
taxes from billions of dollars worth of advertising revenue, a
senior finance ministry official said on Thursday.
Muhammad Hanif, head of the specials cases branch in the tax office,
said Google's refusal to cooperate after it was sent a letter in
April requesting to be allowed to examine the company's tax reports
had raised suspicions.
He told a news conference that the probe would not be launched until
the end of the month at the earliest.
PT Google Indonesia, incorporated in 2011, said it was complying
with the government.
"We continue to cooperate fully with local authorities and pay all
applicable taxes," a Google Indonesia spokesman said in an emailed
response to questions.
The government had also asked to examine the tax reports of the
Indonesian offices of three other U.S. Internet based companies -
Yahoo <YHOO.O>, Twitter <TWTR.N> and Facebook <FB.O>.
Those three companies have complied, officials said.
Yahoo and Google have formed Indonesian limited liability companies,
while Twitter and Facebook operate branches of their Asia-Pacific
offices in Indonesia.
The government believes these companies owe income and value added
tax on billions of dollars of revenue they generate from advertising
in Indonesia, the tax office said.
Hanif said Google's Indonesian entity was only allocated around 4
percent of the total revenues generated from the country, and it was
this amount that was taxed, which he described as too small and
"unfair".
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The communications ministry had estimated the value of digital
advertising in Indonesia at about $800 million last year. The
ministry said all of it was untaxed.
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There was no immediate explanation for the wide discrepancy of the
two agencies' estimates for digital advertising revenue.
Indonesia is facing a sizeable revenue shortfall this year as the
resource-rich country can no longer rely on commodity-related
income.
In a separate development, the tax office said it is checking
whether Ford Motor Co <F.N> had avoided paying appropriate taxes,
after a local newspaper reported that the U.S. car maker modified
imported Everest model vehicles sold in Indonesia to pay a lower tax
rate.
If the car maker is proven to have caused state losses, it may have
to pay back taxes of up to four times the amount it owed, according
to Indonesian law.
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"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.
Ford announced in January it is closing all operations in Southeast
Asia's biggest economy, where it held less than a 1 percent market
share.
(Additional reporting by Eveline Danubrata; Writing by Randy Fabi;
Editing by Simon Cameron-Moore and Alexander Smith)
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