Turkey Suing Google for $47M in Back Taxes

Written on November 3, 2009 by admin

goo$le Dear World:

Google is advertising in your countries.

Duh.

Turkey has recently determined that Google owes them $47M US (71M Turkish lira) in back taxes on advertising sold in Turkey. The government maintains that because Google sells advertising in Turkey and maintains an office and registered subsidiary in the country.

Google, on the other hand, points out that “it runs its ad network operations from Ireland and thus is not obliged to pay taxes in Turkey merely because it owns a subsidiary there.” The suit recognizes that bills and checks (or should I say cheques?) for such advertising are addressed from/to the company’s European headquarters in Dublin.

Says TechCrunch:

In a statement, Google said it is acting in accordance with the tax laws of every country in which it operates, including Turkish laws, and that its negotiations with the government on this issue are ongoing. . . .

We’ve also been in touch with a Turkish lawyer, who tells us the government is making a valid claim, pointing out that Google has set up a full-fledged company called Google Reklamcılık ve Pazarlama Ltd. Şti. (which means Google Advertising and Marketing Ltd.) in Turkey rather than what he refers to as a ‘liaison’ branch. Had it done the latter, says the lawyer, the company would have had to pay very little or no taxes at all.

Personally, I’m a little skeptical of the Turkish government’s claim, mostly because if Google has really been taxable all this time (and since Google is the #1 online and search ad company in Turkey), they (the government or Google) would have figured this out a lot sooner. Did the Turkish government just figure out they could tax Google? Or is this, as TechCrunch points out, just a bargaining tactic tor force Google’s negotiations to go faster?

(Note: the Turkish government says they’ve determined this after a year of investigating. Again, a year? It doesn’t take a year to figure out that someone should be paying you taxes, especially not if a Turkish lawyer can figure it out in one email. If they really wanted the taxes, they could have indicated that Google should be paying taxes at the beginning of the investigation instead of stalling a year while Google racked up more income that they could penalize. I think being dishonest like that should be reason enough to lose the suit.)

Here’s what I think: if you really want to tax Google, countries of the world, then do it—but pass a new law that they can’t get out of. Don’t try to cobble together a legal argument, backform your present laws that may or may not fit the situation, or stall an entire year to try to squeeze more out of them. Because, after all, taxing Internet companies for selling stuff in your jurisdiction has worked really well in New York, North Carolina, etc.

What do you think? Will Turkey get their cash, will the case get thrown out, or are they really just hoping for Google to settle for any amount? Will this make Google reluctant to operate in that country in the future?