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Google Japan hit with back taxes after failing to report ad income

Tech giant transferred revenues to Singapore to reduce payments, authorities say

Google headquarters in Silicon Valley (Photo by Takuya Imai)

TOKYO -- Google Japan has failed to declare 3.5 billion yen ($32 million) in income in the year ended December 2015, even as advertising revenues behind the income were generated in Japan, sources told Nikkei on Tuesday.

Google Japan oversees Japanese advertising for the American technology company, but revenues from the operations were recorded at a Google unit in Singapore, where tax rates are lower. The Tokyo Regional Taxation Bureau judged that the arrangement was specifically designed to reduce Google's tax liability.

The company agreed to pay back taxes totaling 1 billion yen ($9.2 million). The Japanese unit also revised its income for the year ended December 2016.

The issue surfaced amid global outcry about tech companies' use of tax havens. Countries in the European Union are moving toward slapping a new tax on internet giants such as Google, Apple, Facebook and Amazon, known collectively as GAFA.

Google Japan had been recording its Japanese marketing operations as support activities for Google's Singapore unit, with advertisers in Japan paying fees to Singapore. The Japanese unit was reimbursed for its operating expenses as well as given rewards worth 8% of costs.

Google Japan did not return requests for comment.

Japanese multinationals have also been accused of using tax havens. Last year, Nissan Motor and SoftBank Group were forced to pay back taxes worth tens of millions of dollars for failing to declare income that authorities said was actually earned in Japan.

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