Domestic companies have been complaining for years about an unfair treatment of IT heavyweights and them, regarding the corporate income tax they have to pay on the revenue they generate in Korea. Under the current law, the S. Korean government is unable to tax global companies, if these companies have no fixed places of business in the Asian country.
Amazon is one of the global IT firms actively targeting the Korean market as it has recently begun the free shipment of goods purchased by customers there.
Google and Apple are gaining huge profits through the sales of apps, with the former actively expanding its businesses here by, for example, launching its in-car infotainment application Android Auto.
Ahn Jeong-sang, a policy advisor to the ruling Democratic Party of Korea, said it was an urgent task to introduce institutional measures to resolve issues involving global internet firms.
"Under the current law, preliminary or ancillary places of business are not regarded as global companies' offices in Korea, and this has played a role in their tax avoidance," Ahn said.
"Considering the characteristics of the digital economy, the concept of fixed places of business needs to be expanded so that the government can secure authority to impose taxes on them."
He stressed that substantive locations and subjects, to which companies offer their services, should be taken into consideration. For example, when companies' cache servers are in Korea, it should be construed that their places of business are also here, he said.
Korea's Ministry of Economy and Finance said its officials are participating in a taskforce operated by the Organization for Economic Cooperation and Development to discuss taxation policies targeting global IT companies.
However, Google Korea said it complies with Korean laws and regulations.
"Google follows the laws and pays all applicable taxes in Korea," it said. "Information on Google Korea's revenue and profit is regularly reported to the Korean tax authority."