Indonesian tax authorities are pursuing Google’s parent company Alphabet (GOOG) for unpaid taxes over the last five years. If found guilty, the tech company may face a tax bill of around $400m for 2015 alone. The report published by Reuters cited a senior tax official who alleged that Google’s Singapore unit has paid under 0.1% of total income taxes and value-added taxes it owed last year. Muhammad Hanif, head of the tax office’s special cases branch, told Reuters that the office's investigators will be going to Google’s Indonesia head office on Monday. (See also: Why to Watch Southeast Asia's Internet Economy.)

This comes after Google had returned a search warrant last week for investigation by tax authorities. Hanif told Reuters last week, “We will elevate this to an investigation because they refused to be examined, and this is definitely an indication of criminal activity.” Reports emerged at the end of last week that both the finance ministry and the communications and information ministry will pursue to investigate whether Google was involved in tax evasions from its revenues made in the country.

Rudiantara, Communications and Information Minister of Singapore, said last week, “The tax subject is not Google Indonesia, as it is not running the advertisement business, but the one based in Singapore. I will check with the Finance Ministry in which part of the discussion has stalled.” The company’s Singaporean unit is responsible for online services in the Asia-Pacific region including Indonesia.

Hanif highlighted that most of the revenues generated in the country come from these online services and that Google’s Asia-Pacific head office based in Singapore had declined to be investigated earlier in June. He indicated that this development had prompted the tax office to turn the issue into a criminal case.

On the other hand, Google believes that it has paid all taxes owed. Hanif noted, “Google's argument is that they just did tax planning.” He added, “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.”

Yustinus Prastowo, Executive Director of the Center for Indonesia Taxation Analysis, said, “It normally takes at least three years for an Indonesian court to make a decision on a tax criminal case.”

Tax Authorities to Chase Other Content Providers

With Google coming under the hammer, Hanif highlighted that other companies which generate advertising revenues by providing content may also come under the radar and will be chased for back taxes. Hanif also indicated that Facebook and Google accounted for 70% of the advertising revenue in an industry which generates $830 million annually.

The country’s Communication and Information Ministry is currently preparing new tax rules for over-the-top providers. It may start taxing these online companies with a “network presence” in the country. 

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