Is Google About To Pay 76 Crores Penalty?

Google aims to get the dispute with the tax authorities of India settled as soon as possible. Authority of Advance Rulings (AAR) has been moved to India. What is behind this issue? Why has Google Ireland moved the tax liability?

The Indian tax department states that the Google Ireland is the governing source of Google’s businesses in India. The profit and loss accounts are filed to the tax department by the Google India Pvt. Ltd. This is an MNC that takes care of business in India. However, the Indian tax department states that this MNC has not be giving the entire picture of the business, which means the profit and loss that happen during each financial year. The tax department of India enunciates that the income generated by Google in India is not shown in the right amounts. The department accuses Google of devaluing the profit generated and as a result the revenue produced is also shown deflated, which apparently shows the accounts assessment of lesser value. This alleged statement of the tax department of India is for the financial year of 2008 to 2009.

What is the backdrop of this dispute between Indian tax department and Google India Pvt. Ltd?

Google has been credit the distribution fees to Google Ireland. This is where the real issue of tax dispute arises. As per the income tax department, Google should have credited the distribution fees to Google Ireland, after tax deduction. This is stated because the income generated by Google is through the advertisers and users in India, by Adwords based in India.

Google, however, wants to put an end to this uncertainty as earlier as it can. The AAR has been approached by Google for the same, before a month or so. The decision of AAR is said to be the final word in this case.

Google spokesman has articulated that Google which employs around 2000 people in India, always follow to the rules and regulation of the taxation of the country in which it operates. The same is the case with India. The company also mentions that it contributes to a considerable level to the local taxation by employing a huge group of people. Hence the reason they have accelerated the case by proceeding to the AAR.

AAR is always commanded by a retired judge from the Supreme Court of India. Non-residents can approach this body for tax liabilities and long-drawn-out court feuds are settled faster this way.

It is not only the case with the Google, but also the other titans like Amazon have also been reason for raising the fury of the authorities for deficient tax assessment and payment. Google’s mismatch of income generation with the tax payment is not only causing trouble for the company in India. Investigations are going on countries like Australia, UK, France, Italy, and many other countries. Probes go on calculation of tax paid with proportionate to the sales of the search engine giant in respective countries.

Many business giants make use of the tax havens and show higher income in such countries. They show less income generation and pay less tax in different parts of the continent. The MNCs show higher expenses in countries which levy higher tax. Less than 2% of the correct tax is paid by Apple, which is an example that most of the MNCs follow the suit.