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article imageGoogle faces probe in Indonesia over alleged unpaid taxes

By Lucky Malicay     Sep 16, 2016 in Business
Jakarta - Google is facing investigation in Indonesia for allegedly refusing to cooperate with the country’s revenue agency, which is looking into claims the Internet giant failed to settle its local tax obligations.
The tax office in Jakarta claimed Google has paid little in tax despite earning millions in advertising revenue in Indonesia, saying the American firm refused to allow the government to check its financial records.
"We are now elevating this to an investigation, because they refused to be examined. This could be classified as a criminal offence," Muhammad Hanif, a senior office official, told AFP.
Hanif said Google allotted only four percent of its revenues in Indonesia to be taxed considering the fact that it earned tens of millions from its advertising income in the country.
Google has denied the accusations and said it had settled all local taxes since it started to operate in the country five years ago.
"We continue to cooperate fully with local authorities and pay all applicable taxes," a Google Indonesia spokesman told Reuters in an emailed statement.
Aside from Google, the Indonesian government’s Directorate General of Taxes of the Ministry of Finance is also asking to examine the financial statements of other tech companies Facebook, Twitter and Yahoo. The three firms have reportedly agreed to cooperate.
In April, Minister of Finance Bambang P.S. Brodjonegoro said the "digital economy" should provide benefit to the host country.
"What (we) expect (is) that they do not ignore their tax obligation in Indonesia, and only benefit the country of origin. Basically, digital economy in the G20, if you get the benefit of a country, you should pay tax into the country," said Brodjonegoro.
Facebook and Twitter have branches of their Asia-Pacific operations in Indonesia while Google and Yahoo have established limited liability companies in the country.
In Indonesia, imposition of business taxes on foreign entities is based on whether they are (1) running the business or activities, (2) operating a subsidiary, or (3) running the business or conducting activities through the Permanent Establishment status.
Latest records from the government showed that nationwide tax revenue collection in the largest economy in Southeast Asia is expected to hit below the target as participation in the tax amnesty program remains low.
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