Pakistan's federal tax authority, FBR, is planning to tax income generated by Google through their Google adsense program in Pakistan, as reported on Federal Board of Revenue's Facebook page.
Google adsense is an online way of earning revenue that adds relevant and engaging well suited ads on news websites and blogs along side the online content.
Considering the volume of revenue generated through local advertisement in Google adsense program in the region, the Federal Board of Revenue Pakistan sees it as the right of local departments to collect taxes under this program.
“It is difficult to levy taxes on the Internet search engine as it has no permanent establishment in Pakistan,” explains a tax official. “However, since revenue is being generated through local advertisements, local departments have the right to collect tax under this head,”
Following the reports about Indian taxation authorities issuing notices to Google for tax evasion on their part, FBR thinks of it as a high time to tax the web search giant.
According to The Times of India, Indian tax authorities fined Google India a sum of $13.8 million for their tax evasion. Times of India published that, "Google India has misled the department, deflated income, violated accounting rules laid down by the chartered accountants' institute, and also attempted to show wrong revenues to avoid being subjected to transfer pricing adjustments with respect to its international transactions."
In the light of this event, FBR has deployed its tax officials to find out about all the business activites carried out by Google Pakistan. “The FBR chairman has instructed the tax departments to identify the business activities of the company in Pakistan,” said another FBR official.
The tax authorities have also shared a possibility that this move might invite some reservations from United States in the light of the double taxation agreement signed between Pakistan and US.
It has also been reported that In the absence of any permanent establishment in Pakistan, Google officials do not see it as FBR's jurisdiction to tax their revenues.
Pakistan's tax authories, on the other hand, are in search of agents who work on behalf of Google to find out about Google's permanent establishment in Pakistan, in order to assign jurisdiction to tax the web giant.