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Restoring our tax rights

May 09,2017
The so-called Google tax referring to anti-avoidance provisions governments have been enforcing against profits diverted to other nations by multinational enterprises for low or nil rates is spreading to major European countries. Google agreed to pay the Italian tax authority 306 milion euros ($335 million) in tax arrears from 2009 to 2015. It reached a similar deal with the British authority, coughing up $185 million in taxes.

Other global giants Apple, Amazon and Facebook, too, have prospered from global revenue by shifting their incomes to countries like Ireland and Luxembourg with low tax rates, to save on tax expenditures. Italy has been dogging Google for transferring revenue and profits earned from Italy to Ireland that has a relatively lower corporate income tax base of 12.5 percent.

Google, Apple and other multinational also earn a lot from South Korea. Korea is their third biggest market after the U.S. and Japan. Although there have been discussions on rationalizing corporate tax rates, the government and legislative have not been eager on closing the loopholes to demand multinational companies to pay a fair share of their taxable income.

It is easier for digital and online companies to avoid taxes than traditional manufacturers as their revenue is based on intangible contents such as royalties. Authorities must become more ingenious to fix the loopholes. Local ICT companies complain of discrimination because they have to pay higher tax levies and face difficulties in licensing. Foreign and trade officials also must refine their response strategy as U.S administration under President Donald Trump could take retaliatory action to protect U.S. technology companies against the tax crackdown by other states.

Google tax gained global momentum after the Base erosion and profit-sharing measures were addressed in recent G-20 meetings and among members of the Organization for Economic Cooperation and Development. French and Spanish authorities are poised to take similar actions. We would be neglecting our tax rights if we do not join the front.

JoongAng Ilbo, May 8, Page 30