Even with the Squid Game Boom, Corporate Tax is Minimal... 19 Global IT Companies Paid Only 36% of Naver's Tax

Only 153.9 Billion KRW in Corporate Taxes Paid Last Year by 19 Companies Including Google and Apple
Content Market Expands and Profits Surge, but Tax Burden Remains Relatively Minimal

[Sejong=Asia Economy Reporter Kim Hyunjung] Last year, the total corporate tax paid in South Korea by 19 global information technology (IT) companies including Google, Apple, and Netflix amounted to only about 36% of the amount paid by Naver. Even though Netflix earns enormous profits from globally successful content like "Squid Game," the actual tax base remains relatively minimal due to the absence of physical business establishments, experts point out.

According to data obtained from the National Tax Service by Yong Hye-in, a member of the National Assembly's Planning and Finance Committee from the Basic Income Party, the total corporate tax burden of 19 major global IT companies' domestic corporations last year was 153.9 billion KRW. The 19 major global IT companies include Google, Microsoft, Amazon, Facebook, Apple, AT&T, Verizon Communications, SAP, PayPal, Qualcomm, Hewlett-Packard (HP), Netflix, VMware, Adobe, eBay, Oracle, Alibaba, Disney, and Cisco. Their total tax burden was only 35.8% compared to the corporate tax amount (430.3 billion KRW) paid by Naver, a representative domestic IT company last year.

There have been ongoing criticisms that global IT companies avoid taxes by claiming they have no physical business establishments in South Korea despite earning huge profits domestically. In particular, Representative Yong claimed that Google has evaded corporate taxes amounting to 600 billion KRW over the past six years. Analyzing Google's accounting data, Yong estimated that Google's operating profit in South Korea from 2015 to 2020 totaled 3.1 trillion KRW, and the corporate tax based on this taxable income would have reached 784.9 billion KRW. Last year alone, Google earned 1.0643 trillion KRW in operating profit domestically and should have paid 282.3 billion KRW in corporate tax, but the actual reported operating profit was only 15.6 billion KRW, and the corporate tax paid was 9.7 billion KRW. In 2019, Google Korea paid only 10.3 billion KRW in corporate tax, which is estimated to be only 5-10% of the amount they should have paid, according to Representative Yong's office. Furthermore, if Google had paid 282.3 billion KRW in corporate tax last year, it would have ranked seventh among domestic companies in tax payments, following Samsung Electronics, Naver, POSCO, KT&G, Hyundai Mobis, and Hyundai Motor Company.

Representative Yong also argued that corporate tax collection from Apple is not being properly enforced. Apple disclosed its domestic sales for the first time last year (14.9 billion USD, approximately 16.6 trillion KRW), and assuming a 25% profit margin and similar operating profit rate as Google, the corporate tax that should have been paid is estimated to be 247.4 billion KRW. However, Apple Korea has not disclosed accounting data, and its corporate tax is expected to be very small.

Representative Yong predicted that even with the recent digital tax agreements, sufficient corporate tax collection from global IT companies will not be possible. According to the Pillar 1 rules of the digital tax, 20% of Google's global excess profits are allocated proportionally to each country's market size, and corporate tax is levied on this amount. Assuming Korea's market share estimate of 2%, only about 0.04% of Google's total operating profit would be taxable as corporate tax. Yong stated, "There should have been an independent workaround that does not violate the international tax system or a swift revision of tax treaties," and criticized, "Failing to collect the taxes that could have been collected and effectively granting Google over 100 billion KRW in annual tax benefits is no different from giving them special treatment."

This content was produced with the assistance of AI translation services.