Google 'avoids local taxes'

Digital publishers in South Africa are battling to compete for online advertising revenue with Google, which apparently avoids paying local taxes. The digital media environment is rather unique in that revenues can be rerouted via tax loopholes. While local digital publishers have to pay tax to the South African Revenue Service (Sars) on their revenue or profits, an international giant like Google, for instance, currently transacts through an offshore entity based in Ireland, thereby avoiding paying local taxes. Google has a dominant position in the SA online market and some estimates put its current online advertising revenue from South Africa at between R800 million and R1 billion. Based on these figures, SA's lost tax revenue from Google is estimated at R140 million per year in corporate taxes. Online publishers in South Africa would benefit if the advertising playing field was leveled, making global companies abide by the same rules, price structures and economics faced by smaller local businesses. “Most South Africans would be shocked to know the local online advertising industry is paying taxes in SA, but a giant like Google is not”, Alistair Fairweather, chief technical officer at the Mail&Guardian, told Fin24. “The situation is, however, not clear-cut either way. The problem with ‘fairness’, especially regarding tax, is that it is dependent on legislation,” he said. Google is not doing anything illegal. It is just that the SA tax laws and those in other countries simply do not take the internet into account. CAPE TOWN NEWS24