Close on the heels of Google having to deal with some uncomfortable tax evading accusations in Europe, the search giant is facing a somewhat similar scenario in South Africa as well. Google has drawn the ire of the local media company Naspers, which has accused the company of following unscrupulous business practices in the African nation by not only denying the country its rightful share of taxes but also making it difficult for the domestic publishing industry to remain competitive.
“Google clearly has a dominant position in the South African market and local digital publishers would benefit if the playing fields were leveled, making global companies abide by the same rules, price structures and economics faced by smaller local businesses. In the digital age, we accept that we compete with businesses from all over the world. However, it is clearly wrong that, as we invest in building a taxpaying business employing hundreds of South Africans, we are competitively disadvantaged through aggressive tax-planning strategies of global businesses,” says 24.com CEO Geoff Cohen.
Google is estimated to have caused the national exchequer a loss of R140 million per year in corporate taxes. Rough estimates put the loss to another R100 million in PAYE.
Google has denied the allegation, saying it follows South Africa’s tax laws and those of every other country where it has set up operations. The company further argued that the onus is on its advertisers to report and remit value-added tax (VAT). While current laws cannot hold Google accountable for reporting VAT, that is set to change April 1 as digital goods suppliers and services will be brought under the reach of VAT.
Google further stated it also helps the domestic publishing industry to grow by driving traffic to their sites via organic search results, as well as through Google news.
24.com, which happens to be Nasper’s online publishing arm, is not convinced and is seeking changes in the current tax system to make companies like Google accountable. “Considering the rapid growth rate of digital advertising, it remains to be seen whether, and if, South African tax legislation will be amended quickly enough to adapt to this critical issue,” said 24.com sources.
However, it will be interesting to note that this isn’t the first time that Nesper has hurled allegations against Google. The South Africa-based media company had earlier taken Google to court in Poland and Brazil on similar charges. The matter is sub-judice in Brazi, even though Google won the first round there.