Thai tax rules for tech firms could be tightened

BANGKOK/JAKARTA • Thailand is studying plans to toughen tax collection rules for Internet and technology firms like Alphabet's Google, the head of the Revenue Department told Reuters, as the tax affairs of these firms come under growing scrutiny in South- east Asia.

The plans would also cover the mobile transfers and Internet payment sector, said Mr Prasong Poontaneat, director-general of the Revenue Department.

Thailand is focused on changing existing regulations, Mr Prasong said, adding that a working committee had been set up to find solutions on tax collection for companies such as Google and other technology firms.

"We are studying this issue and have set up a committee to look into this over the past two months," he said. "The idea is to seek appropriate solutions for Thailand and it could involve an amendment in some regulations because current laws are outdated and have been used for more than 50 years."

Mr Prasong said that he expects the committee to come up with solutions by the end of this year.

A spokesman for Google Asia-Pacific did not immediately respond to an e-mail or a phone call seeking comment.

Indonesia is pursuing Google for five years of back taxes, and the United States search giant could face a bill of more than US$400 million (S$543 million) for last year alone if it is found to have avoided payments, a senior tax official told Reuters last week.

In Singapore, the low-tax regime and generous tax incentive programmes make the country a big draw for multinationals like Apple, Microsoft and Google, and those from other sectors, to employ regional teams there.

They justify booking large revenue and profits in Singapore as they usually run main business functions such as finance and operations and hold intellectual property rights there or base regional executives in the country.

Singapore's Finance Ministry said in an e-mail statement last week that "profits should be taxed where activities giving rise to the profits are performed and where value is created"and that it does not condone the "artificial shifting of profits".

American business groups in the region warned that the tax crackdown risks slowing planned investments by multinationals.

Investment worth millions of dollars could become stalled due to disputes with Indonesia's tax office, which has taken an "aggressive" approach, said Mr Lin Neumann, managing director of the American Chamber of Commerce in Indonesia.

Last December, Australia's tax office published the tax rates of every company with annual earnings of over A$100 million (S$104 million), a move that it said it would repeat annually in the hope of pressuring entities with "overly aggressive" tax structures.

REUTERS

A version of this article appeared in the print edition of The Straits Times on September 27, 2016, with the headline 'Thai tax rules for tech firms could be tightened'. Print Edition | Subscribe