Historic: Facebook Will Pay Taxes and Internet Tolls in Korea

Martin  KCC 230Mark Zuckerberg is trying to be a mensch, a mutual friend tells me. He’s deeply committed to connecting everyone.

Kevin Martin of Facebook met the Minister in Korea and agreed “to report revenue and pay taxes” in Korea. In addition, they will probably pay “network fees” to the three big Korean telcos. Korea has allowed their telcos to erect “toll barriers” on the net, what Net Neutrality was supposed to prevent in the U.S.

Korea is enormously proud of having probably the best Internet in the world. The Korean government, under pressure from the three big telcos, does not have a policy of neutrality. 

Tax avoidance is a huge issue around the world, especially as the Internet becomes a larger part of every economy. Facebook and Google are collecting tens of billions. often from poor countries, but neither paying taxes nor obeying local laws. Europe is the most visible resister, but the feelings are strong in Africa and Asia. “You Americans are so greedy,” an African said to me at the WCIT in 2012.

News reports in December were that Facebook was changing its policies. They would now pay taxes where they earn income. Korea is the first official agreement.

The American giants are no more dedicated to tax evasion than anyone else. For example, South Africa’s MTN is under tax investigation in Nigeria.

But the web made tax evasion much easier, and the American giants own the web. Depending on whose numbers you use, Facebook & Google have between 60% and 90% of the ad revenue of the web outside of China. Google and Facebook are currently under tax investigation from Ottawa to Slovakia to Tel Aviv to Singapore. Italy and France have claimed $billions, the EU fines are about $3B 

They have no transparency; Apple at one point was moving so much so much money between jurisdictions billions were hanging in limbo, possibly between Holland and the Netherlands Antilles. They apparently hadn’t declared the profit anywhere.

Google, Amazon, Facebook, and Apple are probably more public spirited than most large corporation. But ask their CFOs; their primary purpose is to make large profits.

Cho Jin-young at BusinessKorea has been reporting the telco push to collect from Youttube, Facebook, and others. They are already forcing the Korean content providers to pay heavily – probably over $100M. I’ve previously reported that Korea is one of the most expensive places in the world for content delivery, more than doublung the cost of delivering video.

The telcos are demanding “regulations on ‘economic traffic management’ that charges additional fee on specific platforms be established. He quotes , “There are many cases where Korean portals and platform operators infringe on the interests of users and network operators amid net neutrality controversy,” Cho quotes Byun Jae-il, a lawmaker of the Minjoo Party and a member of the Science and Technology Information and Communication Committee at the National Assembly. “In particular, if foreign companies continue to use networks free of charge, it can crush network operators’ will to invest.”

No one reading this needs me to rehash the arguments over neutrality. The Koreans are probably making a mistake, but it’s certainly their right to decide policy for Korea.

Google is refusing to negotiate.

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