“It’s a globalization problem, it’s not Google’s problem only.”
The fiscal systems in place were created before the globalization age and rules must now be devised by all countries together so as to work everywhere. Google is working with the international authorities to create a system that allows proper taxation of multinationals. As a company, Google pays taxes in every country where it operates, complying with the local legislation, Carlo D’Asaro Biondo said.
Google Bucharest SRL posted about EUR2.5 million revenue in 2012, according to Romania’s Finance Ministry, but Initiative Media agency estimated the revenue of the local subsidiary of the US giant at EUR15.3 million. The explanation for the difference is that online advertising revenue is hard to calculate, because a company based in Romania may choose to advertise on foreign websites, which means the revenue thereof generated is booked by a Google subsidiary in the particular country of those websites.
Things are very simple when one advertises on TV, because one addresses Romanians and the revenue stays in Romania. When one wants to advertise on websites abroad to attract foreign tourists or sell products via electronic commerce platforms throughout the world, it is very hard to calculate locally generated revenue because the revenue will be claimed by the entities in the countries where the ads are run, the Google executive explained.
“A lot of Romanian companies advertise on Google using other Google websites.”
This goes for travel agencies and airlines looking to attract tourists from abroad and invest on websites in other countries. “They don’t invest in Romania, they invest in Russia or Italy, for instance.”
Romanian companies use Google Adwords for online promotion – since many ads are related to user searches on the web. Google’s share of the online search market in Romania is estimated at more than 90% by Statcounter.
The US company has been accused by the tax authorities in a number of European countries such as UK, France and Poland in the past year that it reports lower revenue than it actually makes.
Local tax legislations are not adjusted so as companies could properly pay their taxes. This is the big problem and Google is working with the relevant institutions to find a solution, D’Asaro Biondo said.
The other Google products besides the Adwords platform available in Romania include the e-mail service (Gmail) and Google Maps.
Google has made significant investments to localize these products and services for Romania, Biondo says. The search, the maps and YouTube are localized, as are the company’s phone products.
“Product localization and country-specific content are significant investments that Google has made in the past few years.”
Romania is Google’s second largest market in Southeastern Europe after Poland, when it comes to the number of Internet users (more than 10 million). The Google executive said the company was not planning to open a center in Romania like it did in Poland, but when it decides to expand operations, it would consider Romanian market, too.
(English version by Loredana Fratila-Cristescu)