Debate over Discrimination: Naver, Google Clash over Reverse Discrimination against Domestic Firms | BusinessKorea

Wednesday, November 22, 2017

Naver argued Google made huge profits in Korea without paying any tax or creating jobs while Google Korea released a statement refuting the accusation.
Naver argued Google made huge profits in Korea without paying any tax or creating jobs while Google Korea released a statement refuting the accusation.
SEOUL,KOREA
3 November 2017 - 12:00pm
Cho Jin-young

Google Korea CEO John Lee, who has been summoned to the National Assembly’s audit this year held at the Science, ICT, Broadcasting, and Communications Committee’s conference room in the National Assembly in Yeouido, Seoul, on October 30, is questioned by lawmakers

Naver and Google, which have been rivals in the domestic search engine service market, had a heated discussion. Naver founder Lee Hae-jin, who now serves as the firm’s global investment officer (GIO), recently said during a parliamentary audit, “Google made huge profits in Korea without paying any tax or creating jobs.” In this regard, Google Korea released a statement refuting the accusation and Naver re-refuted the statement again, saying, “Google’s explanations are insufficient and questionable.”

The two companies are going head to head over the so-called “reverse discrimination against domestic companies” that claims foreign Internet service providers such as Google and Facebook don’t take statutory responsibilities as they operate in Korea in the form of a limited liability company, or LLC, unlike domestic companies like Naver. 

Google Korea said in an official statement on November 2, “We express our deepest regrets that Naver’s GIO Lee Hae-jin has made remarks which are inaccurate and open for misinterpretation during a parliamentary audit on October 31. Google currently pays taxes in Korea and fully abides by local tax regulations and tax treaties between Korea and the US. Google Korea also hires hundreds of employees including engineers, sales and marketing staff.” The statement came after Naver GIO Lee said at the parliamentary audit, “Google is raking in huge profits in Korea, but they don’t pay taxes, create jobs or pay for web traffic costs.”

Lee was questioned at the National Assembly over latest findings showing the search portal had manipulated its news tabs to push out controversial stories at the request of those involved. In this regard, he said, “Google will also have the same problems. Google only looks relatively cleaner because it has a smaller market share here.” Google Korea argued, “Google is very proud of the objectivity, fairness and transparency of its news tabs. News arrangement on the Google news platform is 100 percent based on algorithms and is not affected by financial or political pressure.”

It is very rare that a local branch of foreign companies, like Google, makes an independent explanation. This is because its explanations can be seen as Google’s policy as a whole. Considering the fact, it has decided to aggressively make an explanation because the negative atmosphere in Korea can adversely affect business in other countries, according to information technology industry sources.

After Google released a statement, Naver immediately refuted again, “Google Korea doesn’t reveal how much money it makes in Korea and how much corporate taxes it pays but claims that it pays taxes properly. We are not sure whether the explanations are credible enough.” It is estimated that Google rings up 4.5 trillion won (US$4.04 billion) in yearly sales in Korea but not specific figures have been revealed as the company is not required to publicly disclose fiscal information including annual revenue and operating profit made in Korea. Google Korea CEO John Lee was asked about the revenue in Korea at the National Assembly’s audit of the Science, ICT, Broadcasting and Communications Committee. However, he refused to answer, saying, “We don’t check the sales figures by country.”

Naver also said, “Considering Google’s revenues in Korea, Google only employs a mere hundreds of workers. Naver, which posted 2.6 trillion won (US$2.33 billion) in sales last year, currently has 7,700 employees in Korea. Experts emphasized that Google should reveal the accurate revenues first if it pays taxes in Korea. Professor Kim Hyun-kyung from Seoul National University of Science and Technology said, “If Google pays taxes, it should reveal its sales on this occasion.”

Lee Sang-woo, chairman of the Korea Media Management Association, said, “The environment in where domestic companies can compete on a par with foreign companies in Korea should be created. To this end, the starting point is foreign companies, like Google, revealing information such as sales, taxes and employment in Korea. 

Naver and Google are duking out because the government is investigating on the search engine market. The Ministry of Science, ICT and Future Planning (MSIP), Korea Communications Commission (KCC), Korea Fair Trade Commission (KFTC), Ministry of Strategy and Finance (MSF), National Tax Service (NTS) and Financial Services Commission (FSC) established a pan-governmental task force team last month to investigate on reverse discrimination and plans for solutions. Science, ICT and Future Planning Minister Yoo Young-min said in the National Assembly’s audit, “I agree with that domestic companies should not be reversely discriminated. The KFTC and the KCC should cooperate to address reverse discrimination against domestic Internet service providers.”

 

 

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