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Google May Soon Settle Taxes with Indonesian Government

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Alphabet Inc. (GOOGL - Free Report) owned Google is already a major subject of scrutiny in Europe and the matter has started to spread to Asia as well.

The Wall Street Journal reported that Google is in the process of settling taxes with the Indonesian government. Google senior executives and Indonesian tax officials have been meeting since September and negotiating the same.

As part of the settlement, Google may pay back taxes and fines and revise its profit calculation methodology in the country. In September, a senior tax official had stated that Indonesia’s tax agency was planning to bill Google for five years of back taxes and associated fines and the company might  have to pay over $400 million for 2015 alone if found guilty.

The tax office believes that PT Google Indonesia has paid less than 0.1% of the total accumulated taxes as of 2015. It raided the company’s regional headquarters in Singapore, Google Asia Pacific Pte. Ltd. in September after it refused to be audited in June.

According to a Bloomberg report, the settlement may come as early as next week.

Indonesia’s Push to Extract Taxes

Indonesia is pressing on multinationals such as Google, Apple (AAPL - Free Report) , Twitter (TWTR - Free Report) and Yahoo to pay taxes and also trying to bring in billions of dollars stashed abroad through a tax amnesty rolled out in July. The government is also working on cutting the corporate tax rate from 25% to 17%.

The broader ambition is to narrow the budget deficit and boost infrastructure spending. Thailand and Australia are also working on cracking down on multinational tax avoidance.


Google’s Tax Woes in Europe

In January, Google reached an agreement with U.K. tax officials to pay nearly $190 million in British back taxes and make changes in the style of calculating its UK tax bill.

The UK settlement was followed by further investigation. Officials raided Google’s French headquarters in May searching for evidence of "aggravated tax fraud" and money laundering as Google paid just $1.76 billion as back taxes there.

Within weeks after this raid, Spanish officials raided Google’s Madrid office in search of similar evidence.

To Conclude

Google is embroiled in a legal battle across practically all continents. Apart from being a huge drain on resources, these have earned it a bad name on privacy concerns, anti-competitive concerns, patent infringements and what have you.

Nevertheless, the company has had extraordinary success in the courtroom and with government officials around the world. But the developments are worth keeping an eye on and remain an overhang on the shares.

Zacks Rank

Currently, Alphabet has a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Alphabet have been steadily treading higher on a year-to-date basis. The stock generated a return of 0.29% compared with the Zacks Internet Services Market gain of 0.22%.

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