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Google strikes back at Naver: we do pay tax

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강민정

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17.11.03

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Google, which has long faced flak for not revealing how much money it makes in South Korea, has struck back at public accusations made by its local rival Naver this week.

In response to politicians’ intense criticism of Naver during a parliamentary audit on Wednesday, the Korean firm’s founder claimed that Google and Facebook made huge profits in Korea without paying any tax or creating jobs.

Google Korea released a statement Thursday saying that it fully abides by local tax regulations and contributes to job creation, but did not state how much tax it paid in Korea.

Naver called Google’s explanations insufficient, and called on the US internet giant to publicize its revenue and operating profit generated in Korea to show that its taxes are being calculated and paid properly.

Lee — the former chairman of Naver which operates Korea’s most widely-used portal website and search engine — had been summoned to the National Assembly to testify on behalf of the company’s wrongdoings including news manipulation and monopoly over the local internet ecosystem.

After being heavily grilled by lawmakers, Lee said in his closing remarks that “Facebook and Google are raking in huge profits in Korea, but no one knows how much money they make. They don’t pay taxes, create jobs or pay for web traffic costs.”

His comments came in the context of highlighting that internet service providers, both global and local, should be competing on a level playing field and be subject to equal regulations.

“We express our deepest regrets that Naver’s former chairman has made remarks which are inaccurate and open for misinterpretation,” Google Korea said in a statement.

“Google currently pays taxes in Korea and fully abides by local tax regulations. Google Korea also hires hundreds of employees, including talented engineers and sales and marketing staff.”

Most foreign companies including Google currently operate in Korea in the form of a limited liability company, or LLC, which are not required to publicly disclose fiscal information including annual revenue and operating profit made in Korea as well as dividends and royalties paid to the headquarters.

There have been continued calls in Korea to enforce foreign LLCs to make such disclosures as regular corporations do, in order to raise corporate transparency and prevent tax evasion. The Fair Trade Commission has pledged to review such changes.

Google Korea argued that the key issue at hand was whether the company pays its due taxes in accordance with Korea’s requirements.

“Google follows the laws and pays all applicable taxes in Korea. Information on Google Korea’s revenue and profit is regularly reported to the Korean tax authority. The Korean tax authority has already completed an audit of Google Korea and found that the company is in compliance,” Google Korea told The Korea Herald.

Nonetheless, Naver argued that the amounts contributed were the key issue. “This controversy can be put away for good if Google Korea simply publicizes its revenue, operating profit and corporate tax paid to the government,” a company representative said.

After such numbers are revealed, Google can also be objectively evaluated on whether the number of people it employs in Korea is proportional the sales it generates, Naver said.

However, it is uncertain whether Google will voluntarily share such numbers when it is not legally obliged to do so.

When asked to share Google’s earnings in the Korean market during a parliamentary audit Monday, Google Korea CEO John Lee said “sales are published (according to) certain regions, but we don’t disclose those numbers by countries due to sensitivity.”

By Sohn Ji-young (jys@heraldcorp.com)

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