Jakarta reaches tax settlement with Google for 2016

On the tax settlement with Google, Indonesia Finance Minister Sri Mulyani Indrawati told reporters yesterday: “We already have an agreement with them based on 2016. But we can’t disclose the figure.”
On the tax settlement with Google, Indonesia Finance Minister Sri Mulyani Indrawati told reporters yesterday: “We already have an agreement with them based on 2016. But we can’t disclose the figure.” PHOTO: REUTERS

Unclear if both sides still locking horns over search giant's taxes for other years

JAKARTA • Indonesia has reached a tax settlement with Google for 2016, the country's finance minister said, following a months-long dispute over allegations the search giant had not made enough annual payments to the government.

A senior tax official had said in September that Indonesia planned to pursue Google for five years of back taxes and the firm could face a bill of over US$400 million (S$553 million) for 2015 alone if it were found to have avoided payments.

"We already have an agreement with them based on 2016. But we can't disclose the figure," Indonesia Finance Minister Sri Mulyani Indrawati told reporters yesterday. It was unclear if both sides were still locking horns over Google's taxes for other years. Google did not immediately respond to requests for comment. Indonesia is eager to ramp up tax collection to narrow its budget deficit and fund an ambitious infrastructure programme.

Other governments worldwide are also clamping down on what they see as corporate tax avoidance. Last year, Google agreed to pay £130 million (S$228 million) in back taxes to settle a probe by Britain's tax authority, while Thailand is studying plans to toughen tax-collection rules for Internet and technology firms.

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According to Indonesian tax officials, most of Google's revenue generated in the country is booked at its Asia-Pacific headquarters in Singapore. They also estimated that total advertising revenue for the industry in Indonesia was US$830 million, with Google and Facebook accounting for around 70 per cent of that.

But Google has pointed to a joint study by the company and Singapore investor Temasek Holdings that estimated the size of Indonesia's digital advertising market at US$300 million for 2015.

Senior executives from Google's Asia-Pacific headquarters also met Indonesian tax officials in October to discuss its tax bill, a person with knowledge of the matter said.

A senior tax official had said in September that Indonesia planned to pursue Google for five years of back taxes and the firm could face a bill of over US$400 million (S$553 million) for 2015 alone if it were found to have avoided payments.

REUTERS

A version of this article appeared in the print edition of The Straits Times on June 14, 2017, with the headline 'Jakarta reaches tax settlement with Google for 2016'. Print Edition | Subscribe