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 tax payments, a senior tax official told Reuters.
Muhammad Hanif, head of the tax office’s special cases branch, said its investigators went to Google’s local office in Indonesia on Monday.
The tax office believes that PT Google Indonesia paid less than 0.1 percent of the total income and value-added taxes it owed last year.
Most of the 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, Hanif said.
“Google’s argument is that they just did tax planning,” Hanif 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.”
Asked to respond to Hanif’s comments, Google Indonesia reiterated a statement made last week that said it continues to cooperate with local authorities and has paid all applicable taxes.
Hanif estimated Google’s tax bill including fines for 2015 could be as much as 5.5 trillion rupiah ($418 million). He declined to provide an estimate for the five-year period.
The tax office is also planning to chase back taxes from other companies that deliver content through the internet in Indonesia, Hanif said.
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, he said.