Google’s tax settlement talks with Indonesia fall through, investigation continues

A banner at a Google event in Indonesia shows the company’s logo along with images of Indonesia’s traditional shadow puppets.

It looked like a win for Google. Less than a month ago, the Wall Street Journal reported that the search giant was about to settle a tax bill with Indonesia, “for $73 million or less.”

That deal is off, Indonesian tax authorities recently told Reuters, because the amount offered by Google is too small. It’s unlikely an agreement will be reached this year. Indonesia initially aimed for US$400 million in unpaid taxes and fines.

The Indonesian government has been pressing global internet firms like Google and Facebook to pay taxes in the country on the basis of the digital ads revenue they are generating here.

It’s a conflict comparable to the one Google faced in the UK, where both parties eventually settled for US$185 million.

But Google and Indonesia disagree on how to calculate these revenues. As a globally operating enterprise, Google bills most of its Asia-Pacific revenue through its regional headquarters in Singapore. The firm maintains that it’s in compliance with Indonesia’s existing tax rules. Indonesia argues that Google makes money off Indonesian users, and should thus pay more taxes here.

It’s unclear what led to the mood swing at the tax authority. After all, Muhammad Haniv, who leads the tax investigation, had spoken in favor of the settlement just weeks ago, calling it a “tax amnesty for Google.”

Indonesia now seems determined to collect more.

“Because we couldn’t reach a settlement, the investigation continues. Now we want Google to open its books and the tax office will calculate the tax owed,” Haniv told Reuters.