Google is Under Investigation in Indonesia For Possible Tax Evasion

September 19, 2016

Indonesia’s tax office is launching an investigation of Google for potentially unpaid taxes on billions of dollars that the company allegedly raked in from advertising.

On Thursday, a senior finance ministry official released a statement about the investigation.

Muhammad Hanif, head of special cases for the tax office, said that Google refused to cooperate to a letter sent in April that requested an examination of the company’s tax reports.

According to Reuters, that was when suspicions arose. Google’s Indonesian entity reportedly allocates four percent of their total revenue as generated from the country. That amount, which was taxed, is considered to be small and “unfair.”

Hanif explained in a news conference that they won’t be conducting the investigation until the end of the month at the earliest. However, PT Google Indonesia, which was incorporated in 2011, is complying with the government.

“We continue to cooperate fully with local authorities and pay all applicable taxes.”

The Indonesian government wants to examine tax reports of a number of U.S. Internet giants with offices or entities in the country. Yahoo, Twitter and Facebook have complied to cooperate, according to officials.

Yahoo and Google are classified as Indonesian limited liability corporations while Twitter and Facebook operate branches with their Asia-Pacific offices in Indonesia. The tax office believes companies owe taxes on the billions of dollars of revenue generated from advertising in Indonesia.

The communication ministry estimated $800 million of digital advertising revenue was untaxed last year in Indonesia. Indonesia’s internet economy is expected to be worth $81 billion in 10 years, according to the e-conomy SEA 2016 report that was revealed in May by Google and Singapore’s sovereign wealth fund Tamsek Holdings.

Indonesia alone will account for 40% of the total internet economy of the South-East Asian region, growing at a rate of 26% annually thanks to to an increase of users in e-commerce, online travel and ride-sharing companies.

Tony Keusgen, Google Indonesia’s managing director, said:

“The kind of Internet user growth that we are seeing in Indonesia will eventually change the way Indonesians learn, set up businesses, and communicate.”

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