Junta aims to tax tech giants

Singapore’s low-tax regime has attracted tech firms. Source: Wikimedia

The Thai junta is preparing to toughen tax collection rules for internet and tech giants, the head of the Revenue Department has announced. 

The plans would also cover mobile transfers and online payments, director general Prasong Poontaneat told Reuters.

Thailand needed to reform its regulations, Prasong said, adding that a working committee had been set up to find solutions on tax collection for tech firms such as Google.

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seek appropriate solutions for Thailand and it could involve an amendment in some regulations because current laws are outdated and have been used for more than 50 years.”

Indonesia has been pursuing Google for five years of back taxes, and a bill of more than US$400 million for last year alone is apparently being prepared if it is found to have avoided payments, sources say.

Singapore’s low-tax regime is also under the spotlight.

The city-state’s finance ministry said that “profits should be taxed where activities giving rise to the profits are performed and where value is created” and that it did not allow the “artificial shifting of profits”.

The scale of the Indonesian claim against Google, if confirmed, dwarfs the £130 million (US$169 million) settlement Google reached with the UK, covering the period from 2005 to June 2015.

Some revenue from Google’s operations in Indonesia is booked through its Asia-Pacific headquarters in Singapore, which manages sales across Asean. Singapore’s corporate tax rate is 17 per cent, in contrast with 25 per cent in Indonesia.

Google pays taxes on revenue booked through its Indonesian headquarters, which is primarily used for marketing.

Global regulators have been clamping down on tech tax, with Japan recently forcing Apple to pay ¥12 billion (US$119 million) in back taxes.

Google stated: “Google Indonesia has been incorporated as a local company in Indonesia since 2011. We have been and will continue to co-operate with the government and have paid all applicable taxes in Indonesia.”

US trade groups in the region have warned that the tax crackdown risked slowing planned investment by multinationals.

Investment worth millions of dollars could become trapped due to disputes with Jakarta’s tax authorities, which had taken an “aggressive” approach, said Lin Neumann, managing director of the American Chamber of Commerce in Indonesia

“There’s just been a feeling for some time among big taxpayers that they’re like the low-hanging fruits because they’re in the system,” Neumann added.