Indonesia tax agency demands meeting with top Google executives

Google had previously submitted some financial statements, but they did not match the tax agency's own assessment of the revenue the company was making in Indonesia.
Google had previously submitted some financial statements, but they did not match the tax agency's own assessment of the revenue the company was making in Indonesia.PHOTO: REUTERS

JAKARTA (BLOOMBERG) - Indonesia's tax agency says documents submitted by Alphabet's Google as part of a probe into its operations are not adequate and has demanded to meet with top executives from the technology firm.

A meeting on Thursday with the tax office was abruptly halted after senior executives from Google failed to show and the company sent only a local representative, Hestu Yoga Saksama, a spokesman for the Directorate General of Taxation, said in an interview with Bloomberg News on Friday.

Google had submitted some financial statements but they didn't match the tax agency's own assessment of the revenue the company was making in Indonesia, he said.

Financial statements prepared by Google, obtained by Bloomberg, show the search giant posted 20.9 billion rupiah (S$2.28 million) in pretax profit in Indonesia and paid 5.2 billion rupiah in taxes in 2015, substantially lower than the 5 trillion rupiah the tax agency says it's owed including fines from that year. The long-running dispute between the Indonesian government and Google has escalated in recent months to include threats of criminal action.

"Because what we have, our auditors' results show that they have greater revenue," Saksama said. "We hope that Google will cooperate with us so that we have a settlement based on true and proper documents so that we don't have to make it a higher level of assessment, like taking it to court." Google didn't immediately respond to an e-mail seeking comment.

Indonesia's pursuit of large multinationals underscores the challenge facing President Joko Widodo as he tries to fund his ambitious infrastructure program by squeezing more revenue out of an economy that's been hit by weak commodity prices and subdued demand from China, its biggest trading partner.

In Indonesia, Google earned 74.5 billion rupiah in pretax profit from 2012 through 2015, with a total of 18.5 billion rupiah in taxes paid in the same period, documents showed. It also posted US$109.2 million (S$155.9 million) in revenue in 2015 booked through its regional headquarters in Singapore, according to a separate financial statement.

"We continue to comply fully with the government's requests for information, and have provided all the data that has been requested," Google said this week in an e-mailed response to queries on its financial statements.

Google handed over financial statements to authorities on Dec. 28, some of which have been seen by Bloomberg, which included details of 282,000 transactions made by the company's 35,000 Indonesian clients in 2015. They show that 55 percent of the company's revenue in Indonesia in 2015 came from its top 10 customers.

"Our auditors have made some assessment about Google's income in Indonesia," Mr Saksama said. "We have so many results like bank accounts and we have also made an assessment of Indonesian companies that have business with Google. So we have a lot of data here."

Mr Saksama said another meeting would be held and that the tax agency wanted to meet with senior executives from Google to "verify that our data is correct."

Ken Dwijugiasteadi, director general of taxation at the Ministry of Finance, has said the investigation into Google would be escalated if the company's representatives failed to show they were willing to meet the government's demands for more information, reiterating this week that Google's employees could also face criminal action and potentially be jailed.