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Posted: 19 Sep 2016 11:39 PM PDT
(JAKARTA) — Indonesia plans to pursue Alphabet Inc’s Google for five years of back taxes, and the search giant could face a bill of more than $400 million for 2015 alone if it is found to have avoided payments, a senior tax official said.
Muhammad Haniv, head of the tax office’s special cases branch, told Reuters its investigators went to Google’s local office in Indonesia on Monday.
The tax office alleges PT Google Indonesia paid less than 0.1 percent of the total income and value-added taxes it owed last year.
Asked to respond to Haniv’s comments, Google Indonesia reiterated a statement made last week in which it said it continues to cooperate with local authorities and has paid all applicable taxes.
The move comes at a time when Indonesia is eager to ramp up tax collection to narrow its budget deficit and fund an ambitious infrastructure program. Other governments around the world are also seeking to clamp down on what they see as egregious corporate tax avoidance.
Haniv added that the tax office planned to pursue other internet firms for back taxes.
If found guilty, Google may have to pay fines of up to four times the amount it owed, bringing the maximum tax bill to 5.5 trillion rupiah ($418 million) for 2015, Haniv said. He declined to provide an estimate for the five-year period.
Most of its revenue generated in the country is booked at Google’s Asia Pacific headquarters in Singapore. Google Asia Pacific declined to be audited in June, prompting the tax office to escalate the case into a criminal one, he said.
“Google’s argument is that they just did tax planning,” Haniv said. “Tax planning is legal, but aggressive tax planning – to the extent that the country where the revenue is made does not get anything – is not legal.”
The tax office will summon directors from Google Indonesia who also hold positions at Google Asia Pacific, Haniv said, adding that it is working with the Indonesian police.
Globally, it is rare for a state investigation of corporate tax structures to be escalated into a criminal case.
Governments hitting back
Indonesia‘s move to pursue Google shows that the international tax tide might be turning, said Crawford Spence, a professor of accounting at Warwick Business School in Britain.
“In recent decades multinationals have scoured the globe looking for low tax jurisdictions, effectively engaging in rate-shopping as part of tax minimisation strategies,” Spence wrote in an email.
“Now, with initiatives at the transnational level…countries are starting to develop the confidence to hit back.”
In January, Google agreed to pay 130 million pounds ($185 million) in back taxes to settle a probe by Britain’s tax authority, which had challenged the company’s low tax returns for the years since 2005.
The Indonesia case is unlikely to be resolved soon as it normally takes at least three years for a court to make a decision on a tax-related criminal case, said Yustinus Prastowo, executive director of the Center for Indonesia Taxation Analysis.
Haniv said the tax office is planning to chase back taxes from other companies that deliver content through the internet (over-the-top service providers) in Indonesia.
The Indonesian communication and information ministry is working on a new regulation for OTT providers, and the tax office has proposed that a company with a “network presence” in Indonesia should also be subject to taxation.
Total advertising revenue for the industry is estimated at $830 million a year, with Google and Facebook Inc accounting for around 70 percent of that, according to Haniv.
A joint study by Google and Singapore state investor Temasek released earlier this year, however, estimated the size of Indonesia‘s digital advertising market at $300 million for 2015.
Reporting by Gayatri Suroyo and Eveline Danubrata; Additional reporting by Miyoung Kim; Editing by Edwina Gibbs and Alexander Smith
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FFormer US president George H W Bush plans to vote for Hillary Clinton in an unprecedented snub of the Republican candidate, Donald Trump, according to a member of the Kennedy family.
Kathleen Hartington Kennedy Townsend, the daughter of the late Robert F Kennedy, posted a picture on her Facebook page in which she is shaking hands with Mr Bush, with the caption: "The President told me he’s voting for Hillary!!”
She confirmed to Politico that the Republican grandee, who served as president from 1989 to 1993 and vice president from 1981 to 1989, would be voting for the Democrat candidate for the White House.
“That’s what he said,” she told the news website.
Mr Bush's spokesman, Jim McGrath, said: "The vote President Bush will cast as a private citizen in some 50 days will be just that: a private vote cast in some 50 days. He is not commenting on the presidential race in the interim."
The fact that Mr Bush Sr has now, apparently, stated that he will vote for Mrs Clinton, raises questions over whether both his sons - the former president and this year's defeated Republican presidential candidate, Jeb Bush - will follow suit.
If Mr Bush Sr's defection is confirmed, it would be a devastating blow to Mr Trump, who has failed to unite the Republican establishment behind him as a result of his divisive rhetoric and regular insults on the campaign trail.
Mr Bush Sr has strongly endorsed every Republican nominee for the last five election cycles.
He backed his long-time political rival Bob Dole in 1996. “I’ll do anything Senator Dole wants me to do — I’ll campaign for him,” Bush said. “My heart lies at this level, the Dole level,” he said at the time.
Both former Bush presidents have campaigned enthusiastically for both Republican candidate since - John McCain and Mitt Romney.
In an apparent reference to the billionaire, Mr Bush Jr said: "There seems to be a lot of name calling but, as our dad once told us, labels are for soup cans.
"I understand these are tough times and people are angry and frustrated. But we do not need someone in the Oval Office who mirrors our anger and frustration. Strength is not bluster and theatrics. The strongest person isn't the loudest one in the room."
During a Republican debate in February, Mr Trump accused George W Bush of not keeping America safe and not doing enough to stop the 9/11 attacks.
In April, Mr Bush Jr's wife Laura hinted that she'd rather see Mrs Clinton president.
