Big Tech get slap on wrist for tax avoidance in Korea

Global Big Tech companies such as Google, Meta and Netflix have paid a pittance in South Korea taxes and were fined as little as one-ten-thousandth of their revenue in penalties for tax audit avoidance, showed a document obtained by a People Power Party lawmaker.

In 2023, South Korea’s National Tax Service (NTX) imposed only 66 million won ($49,000) in penalties against two tax dodging cases involving global Big Tech firms, according to the document prepared for a regular parliamentary inspection. Song Eonseog, the ruling party member, released the data on Monday.

The penalties are down 96%, compared with the NTX’s levy against global Big Tech in 116 tax audit-related cases in 2019.

Global Big Tech companies were known to have reaped several hundreds of millions of dollars in Asia’s fourth-largest economy annually.

But some of them refused to submit tax reports to the NTX on the excuse that they are only accessible by their global headquarters, or they transferred their earnings in royalties to their head offices, according to tax officials.

Under the current Korean law for national taxes, a company refusing to submit tax reports for audits is subject to a penalty of 5 million won to 50 million won. Such penalties are also imposed on those not responding to tax-related questions or probes.

But a South Korean court’s ruling in 2021 that limits the NTX’s penalty imposition to a maximum of 50 million won per tax audit case significantly reduced tax evasion penalties on foreign companies.
 

Big Tech firms also challenge taxes through legal action, in which their win rate against the NTS reached 80% in 2023.

In 2023, Netflix, the world’s largest streaming company, paid a meager 10.7 billion won in corporate taxes in South Korea on revenue of 773.3 billion won.

Google's tax payment was 17.0 billion won last year after raking in 344.9 billion won in revenue the same year.

Lee Yin-Seon, another ruling party lawmaker, argued the IT behemoth downsized its Korean revenue by transferring it to its Singapore-based regional office. She estimated Google’s revenue in South Korea at more than 12 trillion won last year.

Facebook's South Korean unit paid 4.9 billion in taxes in 2023 against revenue of 70.1 billion won in revenue.

The document obtained by lawmaker Song also showed the NTX was forced to sharply cut the penalty it imposed on an unidentified global platform company for alleged tax avoidance to 20 million won ($15,000) from several million dollars.

Another global IT company was also charged with just several tens of thousands of dollars in penalties for not complying with domestic tax laws. It turned down both on-site and Zoom interview requests by NTX officials concerning a tax audit.

Song is preparing to propose a bill to tighten tax regulations by introducing a mandatory charge against companies refusing to submit tax reports or cooperate with tax inspections.

Write to So-Ram Jung at ram@hankyung.com
 

Yeonhee Kim edited this article.