(1)Google app marketplace sales to reach KRW 3 trillion ... Where is tax

The borders between countries are disappearing and the war without gunfire continues with the era of global platforms. However, in Korea, overseas operators are not subject to various regulations, so they earn profits without any hurdles. However, domestic companies are worried about market erosion because of "deep discrimination", which is tied to various legal regulations. The Korea Communications Commission is planning to form a social dialogue organization "Internet Win-Win Cooperation Body" with participation of Naver, Kakao, Google and Facebook in the beginning of next year in order to resolve this situation, but opinions about effectiveness are different. The Digital Times examines the actual situation of reverse discrimination and measures to resolve domestic companies` anxieties.

In the industry, `internet win-win council`, which is launched to make equal regulation to domestic and foreign operators, should be able to grasp accurately from domestic sales of foreign companies in order to be able. In fact, Google`s parent company, the Alphabet, divides sales by region into US, UK, and other regions when disclosing earnings to the Securities and Exchange Commission (SEC). Google`s overall sales in the 2016 earnings report were about USD 90.3 billion (about USD 98 trillion), while sales in the UK were USD 7.87 billion (about USD 8.46 trillion).

Google`s UK subsidiary reported sales of £ 1 billion (approx. KRW 1.5 trillion) in 2016. This is only 17% of UK sales to the US SEC. In other words, it can be interpreted that more than 80% of the revenue generated by Google in the UK goes to places other than Google`s UK subsidiary. That`s why even if you know the sales of Google Korea and it does not mean the total sales that Google makes in Korea.

The situation of `tax avoidance` is being captured in Korea. Google is currently making profits mainly in Google, which is an advertising and app marketplace in Korea. However, Google Korea`s revenue is reported to the National Tax Service. Google Play sales are missing. It was reported that Google reported only sales of KRW 200 billion last year.

In the first half of 2017, the size of the display ad and video ad market increased by 19% to KRW 608.6 billion. Especially, YouTube`s revenue in the video advertising market totaled KRW 74.17 billion. This is 3.2 times more than Naver, which recorded KRW 23.85 billion. The combination of Google`s mobile ad platform, network advertising products, search ads, and more will boost sales.

The problem is the profits we collect from Google Play. The app analyst Aigee E-Works estimated Korea`s cumulative sales of Google Play in January ~ November this year at 3.16 trillion won. This is a 71.3 % increase over the same period last year. Google takes 30% of Google Play sales as a commission. This is an estimated amount of game sales, so Google is making at least USD 1 trillion in profits.

It is not caught by the domestic tax authorities. This is because the amount that domestic users pay for in Google Play is counted as a Google Singapore corporation. A representative from the National Tax Service stated, "Google Korea is classified as a corporation invested by foreigners, so it is subject to the same laws as domestic corporations, but sales of app market are not counted in Korea."

For this reason, Korean Internet companies compete in an unreasonable situation to compete in `tilted playgrounds`. Domestic sales of domestic Internet operator Naver last year amounted to KRW 2.9 trillion and paid KRW 274.6 billion in corporation tax. However, Google, which is estimated to have posted sales of more than KRW 3 trillion only on Google Play, does not disclose accurate sales and tax payments.

It is the industry response that domestic companies that have to run on the stage of the world and who are already on their feet and are not flat on the floor should experience relatively deprivation and unfairness. If the problem is not solved by trying innovative ideas, it will eventually be called Google`s ship and the reality will be repeated. One Internet industry expert said, "Even if we compete fairly against global IT dinosaurs, we are not likely to succeed. Even in Korea, we are being discriminated against. We are asking for the rule of the market that domestic and foreign companies should compete in equal conditions. "He said.

In this year`s audit, Lee Hae-jin, Global Investment Manager (GIO), said, "Cyworld is gone and profits are not taken by small companies, but Facebook and Google take it." They are making a huge amount of money in Korea and we do not know what to earn, we do not pay taxes, and we do not pay for traffic."

By Jin Hyun Jin 2jinhj@


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