AH 2015 A New Google LOGO-158

South Korea Leading in Implementation of “Google Tax”

October 20, 2015 - Written By Fernando Bonilla

South Korea is hoping to collect their share of profits from international companies by launching a “Google tax”. This new corporate tax would levy a substantial amount from firms that operate in several countries and slyly evade delivering on their expected tolls.

Companies that operate in several nations at once are notorious for their ability to keep their profits out of government hands. Officially the Act on International Tax Adjustment, the “Google tax”, as it is commonly referred to, is given the name because American businesses in particular are raking in billions around the world and keeping the money to themselves. Think Amazon, Apple, and Google itself. All three of these companies were able to store their massive revenues in places they know will help maximize their profits. Specifically, these businesses are taking advantage of Base Erosion and Profit Shifting, also known as BEPS. As a result, the U.S. and other governments are losing out on corporate taxes that would amount to massive funding. Whether or not you agree with the percentage taken from businesses in duties, governments have decided to no longer sit idly by and see their share of profits stay hidden away and out of reach.

Although American corporations are among the worst offenders, they are by far not the only guilty parties. In 2013, 4,752 of 9,532 international companies operating in South Korea paid exactly nothing in corporate taxes. Worldwide, members of the Organization for Economic Co-operation and Development (OECD) estimated they lost $240 billion in corporate taxes that weren’t paid.

Although Korea is far from the only nation planning to adopt a similar “Google tax”, it is among the first. Only the U.K has previously announced a similar tax, deciding to levy multinationals to the tune of 25% of profits. Korean regulations for the new “Google tax” are expected to roll out as early as this year.  The nation’s Ministry of Planning and Finance has said that they expect to be able to revise the policies a year after implementation, which will help demonstrate the ideal application of the law in other nations.

Members of the G20 are in the process of introducing a similar tax, but not until 2017. Korea, home of Android’s largest OEM Samsung, is displaying a level of leadership in the international community by implementing their tax first. Whether or not the duties will force wealthy tech businesses like Google and rival Apple to pay up once and for all remains to be seen.