[Turkey] Following an investigation that lasted over a year, Turkish authorities are fining Internet giant Google a total of 71 million Turkish Lira (approx. €32 million or USD $47 million) for supposedly dodging the national tax system.
Local media reports (links in Turkish) teach us that the Turkish government claims it is entitled to additional taxes because of the fact Google operates its online advertising in the country and even boasts offices and a registered subsidiary there while bills and payments originate from Ireland. That latter part rings true, since the search juggernaut’s European headquarters are located in Ireland’s capital and most of its support and financial services are centralized there.
But Turkish authorities say Google is required to pay national taxes for revenue generated through its registered company based in Turkey, and asserts that an extensive audit shows that the American company owes the government nearly $50 million in unpaid taxes.
Google, which is market leader in search and online advertising in Turkey, has unsurprisingly countered these claims saying 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. 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.
Did Google make a mistake when setting up shop in Turkey, or is this public announcement merely a tactic of the government to speed up its negotiations with the company? Either way, this story will be continued and I’d wager the issue will likely get settled soon enough.
On a sidenote: the Turkish government has still shown no intention of stopping its year-long blocking of Google-owned YouTube in the country, which is fairly ironic even if not totally related to the tax issue.
(Hat tips go to Emrah Saglik for the tip and Webrazzi editor and TechCrunch Europe contributor Arda Kutsal for his help in translating and providing more background)