Google is once again under fire for its international tax practices. This time though, the flak isn’t coming from an international government, but South Africa’s largest online publisher.
In a statement issued to the press 24.com CEO Geoff Cohen said: “In the digital age, we accept that we compete with businesses from all over the world.
“However, it is clearly wrong that, as we invest in building a tax-paying business employing hundreds of South Africans, we are competitively disadvantaged through aggressive tax planning strategies of global businesses.”
The publisher, which is a division of emerging markets media and internet giant Naspers, says that Google’s use of various off-shore accounts for its transactions means that it’s not paying anywhere near as much tax in the country as it should be.
This it says, means that South African publishers are simply unable to operate on a level playing field with the internet giant.
As Memeburn pointed out in mid 2013, Google pulls in around R1 billion in advertising a year in South Africa.
That’s about as much as South Africa’s digital ad industry makes as a whole. Google makes this revenue with very little infrastructure development needed and with only a small satellite office of about 30 or so people.
24.com reckons that this puts lost tax revenue from Google at an estimated R140 million per annum in corporate taxes, and possibly a further R100 million in PAYE.
They resort to tax-avoidance strategies known as the ‘Double Irish’ or ‘Dutch Sandwich’.
Google however strongly denies that this is the case, especially when it comes to PAYE, noting that it pays that tax for every employee it has in South Africa.
When Memeburn approached Google for comment on Cohen’s statement, a Google spokesperson said the company “complies with tax laws in South Africa and every country where we operate.
Google has come under fire for its international tax policies in the UK after it emerged that it had paid just £6 million on £2.5 billion worth of sales in the country in 2012.
A number of countries have now instituted special Google taxes in a bid to curb that kind of behaviour.
The most recent country to institute a Google tax is Italy, which did so in December 2013.
Other countries, such as France, have issued Google with massive fines for tax non-compliance.
24.com is in favour of applying the former approach in South Africa. Significant legislative changes will be required before South African internet businesses will be able to compete with some of their global counterparts on a level tax playing field, it says.
The state appears to be heading in that direction, as it readies legislation that will force overseas companies selling digital goods to South Africans to pay VAT on those sales.
In a 2012 interview, Google Chairman Eric Schmidt said he was “proud” of the way Google had avoided paying taxes. “It’s called capitalism,” he said, “We are proudly capitalistic. I’m not confused about this.”