Naspers-owned 24.com has clarified its position regarding Google’s tax practices in SA, which have also come under severe criticism in other territories, most notably the UK, France and Italy.
Critics claim that Google abuses tax and accounting laws that allow it to pay less tax.
In South Africa, as in the UK, entities which are not local tax residents are only subject to income tax in respect of income which arises from a “source” within the country.
Earlier this last week, 24.com argued that digital publishers in South Africa are struggling to compete for a slice of the online advertising pie with Google, which currently transacts through an off-shore entity without having to declare revenue or profits, thereby avoiding paying local taxes.
Geoff Cohen, CEO of 24.com, told CNBC Africa: “I don’t think for a moment we are suggesting that anything Google is doing, or in fact companies like Google, is in any way illegal.”
“What they are doing is absolutely legal, it is absolutely within their rights following legislative practice.”
He said that it is becoming more apparent in a globally digital world that that tax codes that have been written up, “need to address the fact that it is increasingly easy to raise revenue out of different geographies for the benefit of companies based very far away without providing any of the returns that a similar company would have to produce, if they were competing locally”.
Cohen stressed that 24.com was speaking as a digital publisher in SA, rather than as Naspers, from a global perspective.
“We are kind of raising a flag…(saying) legislators, take a look at this….and debate whether this is a problem, whether global companies like Google and Facebook, and to a degree, like Apple, are benefiting at a higher ratio than local companies.”
He said that with the aggressive tax methods used by the likes of Google, in theory, it prejudices local companies who have to pay higher taxes.
The Google tax
24.com highlights a legal development in Italy dubbed “the Google tax” which could set an international precedent, opening the way for local taxing of Google on-line advertisements purchased in countries around the world, including South Africa.
It says that the new provisions apply to Italian purchasers of online advertising, requiring them to buy only from businesses that are registered for Italian VAT payments, thus forcing them to comply with local tax laws.
“Significant legislative changes will be required before South African internet businesses will be able to compete with some of their global counterparts on a level tax playing field in South Africa, 24.com said.
Google South Africa responds
Last year, BusinessTech asked Google South Africa for clarity on its position within the South African market, but a Google spokesperson skirted the queries, saying that the company does not break up revenues by country (except for the US and UK) and simply stated that it complies fully with the tax rules in South Africa, as in every country it operates.