Internet giant Alphabet (NASDAQ:GOOG) unit is closing on a settlement with Indonesian government tax authorities for around $73 million. That is way lesser than what the country’s officials initially asked for, according to the reports.
One of the country’s senior Tax official Muhammad Haniv said that “Consider this tax amnesty for Google.”
If this deal is agreed, Google won’t be penalized, he said, and will likely owe no more than 1 trillion rupiah in back taxes.
Couple of months ago, the Tax department estimated that Google outstanding amount was up to five trillion rupiah in 2015 taxes and fines.
In the past Google has said that it had paid all relevant taxes and was regularly liaising with the government.
Recently, President Joko Widodo’s government, has been targeting a rise in tax collection to fund his future plans especially from the multinational companies. Earlier this year, the tax agency said it would probe foreign internet companies, claiming they had been underpaying for years.
Meanwhile in this case scenario, tax people claimed the company used its Indonesian unit as just an advertising event organizer under the management of Google Asia Pacific, its local HQs in Singapore, which handles all contracts from Indonesian advertisers. Indonesian establishments avows that Google Asia Pacific pays the Indonesia unit’s expenditures and adds 8% that is booked as the unit’s profit. Google has declined to comment.
Furthermore Silicon Valley firms Google and Facebook grabbed 70% of Indonesia’s total digital advertising revenue last year of $830 million, Indonesian tax officials say. In a combined investigation report this year with Singapore’s state investment firm Temasek, Google put Indonesia’s total digital-ad market in 2015 at $300 million.
Although Indonesia is aiming multinationals on tax collections, it is at the same time persuading foreign investment by freeing many sectors.