Google-linked firms in tax fraud probe

By Qian Yanfeng and Wang Xing (China Daily)
Updated: 2011-04-01 07:22
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SHANGHAI / BEIJING - Three companies linked to the Internet search giant Google have been investigated for alleged tax fraud in China, Economic Daily reported on Thursday, citing sources with China's taxation authorities.

The companies have allegedly been found using fake invoices and have had accounting and business tax irregularities involving more than 40 million yuan ($6.06 million), the report said.

The taxation authorities are understood to have asked the companies to correct the problems and have retrieved the money.

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The report also said tax authorities are further investigating Google businesses in China on suspicion of tax evasion.

Google, the world's largest Internet search company, responded to China Daily on Thursday in a statement saying: "We believe we are, and always have been, in full compliance with Chinese tax law."

It was also not immediately clear whether the three companies are businesses solely owned by Google or if they are joint ventures or separate entities that may do business with Google. They included two that did not use the Chinese name for Google in their names and one that is called the Google Information Technology (China) Company Ltd.

One of them, located in Raffles City, a downtown office building in Shanghai, bears the "Google" sign in its reception although its Chinese name did not suggest it is part of the company. Visitors were barred from entering or asking any questions on Thursday.

Both the State Administration of Taxation and Shanghai Local Taxation Bureau declined to comment on the allegations.

It is not the first time that Google-connected businesses in China have been investigated for tax fraud.

In October 2007, two Google-affiliated companies registered in Beijing were investigated for tax evasion allegedly involving more than 20 million yuan.

Google has been riding on a roller-coaster in its development in China, which boasts the world's largest Internet population.

Since Google moved its Chinese mainland search engine servers to Hong Kong early last year, its market share dropped to 19.6 percent in the fourth quarter of 2010, from 35.6 percent for the same period a year earlier. Its local rival Baidu, meanwhile, represented 75.5 percent of China's online search market during the same period.

The search giant's long-term development in China encountered another major obstacle when China's largest Internet portal, Sina, said on Tuesday it had replaced Google's search service on its websites with its own technology, further denting the US giant's presence in the Asian market.

Xinhua contributed to this story.