Assemblyman Kim Young-sik: "Google's Reduction of Domestic Sales Figures Is for Tax Avoidance"

by Kang Nahum

Published 14 Apr.2023 10:47(KST)

[Image source=Yonhap News]

Google Korea has been criticized for intentionally reducing its reported earnings to evade taxes by excluding domestic app market commission revenue from its sales performance.

According to the office of Kim Young-sik, a member of the National Assembly's Science, Technology, Information and Broadcasting Committee from the People Power Party, Google Korea's sales last year were 344.9 billion KRW, a 17.9% increase from 292.4 billion KRW the previous year, with an operating profit of 27.8 billion KRW during the same period, as stated in the audit report.

Sales by segment included 144.1 billion KRW from advertising and other reseller revenue, 53.3 billion KRW from research and development service revenue, 136.6 billion KRW from marketing service support revenue, and 10.9 billion KRW from hardware revenue.

Despite numerous criticisms during last year's National Assembly audit, Representative Kim pointed out that the app market commission revenue, which constitutes most of the earnings, was still excluded from the performance report. When estimating the app market commission revenue by applying the proportion of Google Play in Korea and advertising shares to Google Asia Pacific's sales, it ranges from at least 4.2 trillion KRW to as much as 6.4 trillion KRW.

Kim said, "According to the 2020 National Tax Service data analysis, the value-added tax paid by 134 global IT companies including Google and Netflix was 237.6 billion KRW, which is less than the 450 billion KRW corporate tax paid by a single company like Naver."

He added, "Although the earnings were made from Korean users and Korean companies, the intentional reduction of reported earnings through tax havens and the use of loopholes for tax evasion can only be seen as an act of deceiving the people of the Republic of Korea."

In particular, Google paid 16.9 billion KRW in corporate tax last year and 13.8 billion KRW in 2021. If the app market commission revenue, estimated at about 6 trillion KRW, were included in sales, the corporate tax could reach 500 billion to 600 billion KRW, comparable to Naver's level, according to Representative Kim.

Kim emphasized, "There is an urgent need to improve laws and systems to address unfair and illegal practices such as Google’s overseas transfer of domestic sales, free-riding on domestic networks, and abuse of monopoly power in the app market."

Regarding these criticisms, Google Korea explained, "Google Play business revenue is attributed to Google Asia Pacific, a Singaporean corporation that provides the service, and therefore is not included in domestic sales."