[2024 National Audit] 'Unpaid Network Usage Fees' and 'Tax Evasion'... Ruling and Opposition Parties Criticize Google and Apple

Google Korea's Unpaid Network Usage Fees and Apple Korea's Tax Avoidance Allegations Highlighted
Park Chung-kwon: "Revenue Generated in Korea but Reported Overseas... A Trick"

Members of the National Assembly's Science, Technology, Broadcasting and Communications Committee (STBCC) from both ruling and opposition parties questioned Google Korea and Apple Korea about unpaid network usage fees and allegations of tax evasion.

Park Chung-kwon, Member of the People Power Party, and Ahn Cheol-hyun, Vice President of Apple Korea [Captured from the Internet Medical Broadcasting System]

On the 8th, during the STBCC audit held at the Government Complex Sejong, Kim Woo-young, a member of the Democratic Party, pointed out, "Yesterday, during the audit, Lee Sang-hwi of the People Power Party asked Google Korea whether they pay network usage fees in Korea. They responded that they pay when accessed from the U.S., so why do they claim to pay connection fees in the U.S.?" In response, Kim Kyung-hoon, president of Google Korea, said, "I understand that the international agreement is that connection fees are paid when first accessing the internet, so that subsequent data can flow anywhere."

Kim Woo-young rebutted, "That is Google's convenience-oriented approach," adding, "When accessed from the U.S., connection fees are paid to U.S. telecom companies like AT&T, but when supplying content to users in Korea, connection with Korean telecom companies causes domestic traffic generation costs." He further asked, "Did you provide that answer after sufficient legal consultation, or was it just a convenient response?" Kim Kyung-hoon replied, "It was not a convenient answer but a response after reviewing international agreements," and explained, "We are a company with many networks such as submarine cables, and I understand that we use networks based on private contracts with domestic ISPs (Internet Service Providers)."

Park Chung-kwon, a member of the People Power Party, pointed out allegations of tax evasion by Google Korea and Apple Korea. Park said, "Global big tech companies dominating the worldwide platform market generate sales in Korea but report revenue in countries with low corporate tax rates like Singapore or Ireland through cunning methods." He then asked Kim Kyung-hoon, "According to the Ministry of Science and ICT's report on the mobile content industry, Google Play's domestic sales in 2019 were close to 6 trillion won. Isn't the app market the largest revenue sector for Google?" Kim Kyung-hoon responded, "Google Korea mainly focuses on advertising business, which generates much larger revenue," adding, "The revenue is about 360 billion won." Park retorted, "I don't know which is bigger between 360 billion won and 6 trillion won," and asked, "What exactly does the president of Google Korea do?" Kim explained, "In this business, the contracting party is not Google Korea, and the actual servers and operational staff are not located at Google Korea."

Park also criticized, "Google Korea's corporate tax is at the level of a small or medium-sized enterprise," and said, "It is an unjust form of plundering to extort high fees from domestic companies but not pay proper taxes." Addressing Ahn Cheol-hyun, vice president of Apple Korea, he said, "Apple is suspected of evading corporate tax by overestimating costs," noting, "Apple Korea's cost of sales ratio in 2022 was close to 95%, while the operating profit margin was only 1%." He added, "Although the cost of sales ratio decreased somewhat in 2023, it is still about 33% higher compared to the headquarters," arguing that Apple Korea raised consumer prices by increasing the cost ratio despite using distribution channels like Samsung Galaxy.