Google surprises world by talking for international tax framework

Will Google really obey its global tax obligations?

Google’s vice chairman Karan Bhatia most recently published on its website www.blog.google, “Corporate income tax is an important way companies contribute to the countries and communities where they do business, and we would like to see a tax environment that people find reasonable and appropriate.”

"We hope governments can develop a consensus around a new framework for fair taxation, giving companies operating around the world clear rules that promote sensible business investment," said Bhatia.

Based on what he said, Google will do its best to obey tax obligations in many countries. However, its performance in the future remains questionable. Specifically, despite the Law on Cybersecurity, which requires the establishment of a representative office, being in force for more than six months, Google keeps ignoring the plan of opening branches in Vietnam.

The fact that Google does not have branches or representative offices is what allowed to dodge tax in Vietnam for so long. According to the Ministry of Finance's (MoF) report, in 2016-2017, Facebook and Google only paid VND120 billion ($5.28 million) in tax in Vietnam via their partners, including advertising agencies and Vietnamese businesses directly purchasing their services.

This is a minuscule amount compared to their huge income in the local market. According to the latest data published by market research company ANTS, in 2018 Vietnamese firms spent $550 million on online advertising, of which Facebook took up $235 million, Google $152 million, and the remaining $150 million was divided among local advertising firms.

Over the past time, many countries have made strong efforts to collect taxes from Facebook and Google. Specifically, the government of the UK announced a drastic change to the way Silicon Valley tech giants would be taxed. The UK will issue a 2 per cent tax rate on the revenue tech giants make from UK users, estimating that it could raise up to £400 million ($508.5 million) a year starting from 2020.

In every country, these cross-border platforms are a real challenge for the sustainability and fairness of the national tax system. The rules have not kept pace with changing business models, and it is clearly not sustainable or fair that digital platform businesses can generate substantial value in the UK without paying tax.