Google earning trillions in app market fees, "Korea revenue 290 billion won"... Tax avoidance controversy

[Image source=Yonhap News]

[Asia Economy Reporter Kang Nahum] Google Korea announced that it recorded sales of 292.3 billion KRW last year. This is a 'half-baked' disclosure of results that does not reflect the app market commissions worth trillions of won. There are criticisms that the company once again reduced its disclosed performance to evade taxes in Korea.

According to the industry on the 15th, Google disclosed yesterday that its sales last year were 292.3 billion KRW, a 32.8% increase compared to the previous year. Operating profit increased by 88% to 29.3 billion KRW, and net profit increased by 152% to 15.5 billion KRW.

The sales disclosed this time consisted of advertising revenue generated from Google’s website, Google Search app, Google Play, YouTube, and so on. The core app market payment commissions were excluded.

Google does not disclose app market payment commissions on the grounds that it does not have a fixed place of business, i.e., servers, in Korea. Instead, app market revenue is recorded as sales of Google Asia Pacific located in Singapore.

The Korea Mobile Industry Association estimates that the scale of app market payment commissions earned by Google Play in Korea is about 5 trillion KRW. In 2020, Lim Jae-hyun, Executive Director of Google Korea, stated at a National Assembly audit, "According to an institution called App Annie, it is estimated to be about 1.4 trillion KRW." This is why there is criticism that the disclosed results are 'half-baked.'

Google Korea’s reduction in disclosed sales also raises suspicions that it is to evade taxes. Since the corporate tax rate in Singapore, where Google Play has its business establishment, is much lower than in Korea, recording Korean earnings as Singapore earnings can significantly reduce taxes.

In January 2020, the Seoul Regional Tax Office judged that Google Korea evaded taxes by placing servers overseas and imposed about 500 billion KRW in corporate tax arrears. Google Korea paid the tax first but filed an objection claiming it was unfair.

Overseas, discussions to prevent tax evasion by big tech companies such as Google are actively underway. In October last year, the Group of Twenty (G20) leaders approved a 'global digital tax' agreement to prevent tax evasion by global IT giants. The core idea is that multinational corporations generating huge profits pay a certain percentage of taxes to the countries where they conduct business activities. The global digital tax is scheduled to be fully implemented from 2023.

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