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Company pays little domestic tax, as profits are credited to the Singapore branch
With attention focusing on whether Google will follow the lead of Facebook, which announced that it will be calculating its revenue for each country and filing taxes with the local authorities as early as next year, a market research firm estimates that Google had more than 3 trillion won (about $3 billion) in sales on the Play Store (Google’s mobile phone application distribution service for Android phones) just in South Korea alone. In addition to this, Google brings in considerable revenue in the country from search advertisements and YouTube advertisements. On Jan. 15, IGAWorks estimated that the Google Play Store had brought in 3.43 trillion won (US$3.22 billion) in sales in South Korea. This sales figure combines the amount spent buying apps and making in-app purchases (that is, money spent while using an app, such as users buying items for a mobile game). This was 64% higher than the estimate for the previous year of 2.93 trillion won (US$2.75 billion) and more than twice the estimate for 2015 of 1.68 trillion won (US$1.58 billion). “This estimate was based on app revenues and revenue rankings posted on the South Korean version of the Play Store. In our analysis, the growth of sales in the Play Store was led by the craze in mobile games remaking online game Lineage, including Lineage M and Lineage 2: Revolution,” IGAWorks said. Some South Korean analysts think that the Play Store’s sales are much higher than that. The Korea Mobile Internet Business Association estimated that the Play Store had 4.4 trillion won (US$4.14 billion) sales in 2016, which is 1 trillion won higher than IGAWorks’ estimate. “Figures provided by App Annie, an app analysis firm, show that South Korea accounts for 2.5% of downloads of the Play Store but 14% of sales in the store. For Google, South Korea offers great value for money with the Play Store,” said one source in the industry. Google pockets 30% of sales on the Play Store. In other words, Google turned a profit of more than US$1 billion in South Korea from the Play Store alone last year, not to mention search advertisements and YouTube advertisements. According to data provided by the National Tax Service, there were just 394 companies (as of 2016) with more than 1 trillion won in sales. “It’s fair to say that Google earned at least 2 trillion won (about US$2 billion) in South Korea alone last year,” said a source in the industry. All of Google’s sales on the Play Store are credited to its Singapore branch, which means that the company barely pays any tax in South Korea. Since the company also reroutes its sales to countries with low corporate taxes in Europe, the EU is already discussing a special tax that could be levied against Google. As a limited liability company, Google Korea has no responsibility to release its business information, and it does not make public its sales, profits or even the taxes it pays. It reportedly told government officials that it had sales of 194 billion won (US$180 million) in 2015 and 267.1 billion won (US$251 million) in 2016. “We cannot confirm this because we won’t make separate calculations for our sales in South Korea. Google abides by South Korea’s tax laws,” said a spokesperson for Google Korea. By Kim Jae-seop, staff writer Please direct questions or comments to [english@hani.co.kr]
