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Google Tax Evasion in China?

Before it’s Google/MSN/Yahoo to Baidu redirection, now it’s tax evasion.

A TechCrunch blog mentions that Google (GOOG) is under investigation in China for tax evasion.

According to local reports, the investigation into Google includes evasion of business and personal tax, and tax on employee options.

This is a difficult process to make because the transaction involved more than one country. Each country has its laws governing taxation and while one defines its process explicitly, it may be different in the other. Transactions that happened in China could be translated as something that’s consummated in the United States, where payment of taxes has to take place.

Sina (Chinese text) has a confirmation that an investigation by the Beijing Municipal Local Taxation Department is underway and could possibly include other Internet companies operating in China such as Yahoo!, Baidu and Taobao.

Google has evaded tax liabilities, including business tax, personal income tax and tax on Options from 2002 to 2006, according to the reports of anonymous industrial insiders made several days ago. To date ycwb.com has failed to reveal the specific sources of those reports.

But according to China Tech News, Google denies this accusation.

According to news reports on Ccidnet.com, Google reportedly began to provide Chinese language search services in China as early as 2000 and launched its Chinese keyword search in 2003, but the company did not record any of its business transactions in China until it set up a branch in China in 2006. According to China’s policies mentioned in the article, once a foreign company begins business in China, it is reportedly obligated to pay the taxes for the previous five years. So the report estimates that Google might have evaded over RMB100 million in taxes in China in the five years before 2006, based on its gross income of RMB285 million in 2006.

The report went on to mention that Google China’s spokesperson says it is an incorrect rumor concocted in the media. The spokesperson says that the Google has been abiding by Chinese laws and regulations since it first set its foot in the country, so this rumor is groundless.

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Elmer W. Cagape is an SEO consultant based in Hong Kong. Into Seinfeld, Toad the Wet Sprocket, space exploration, comedy films, digital marketing and travel. Follow him on Twitter (@elmercagape).

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