Here’s a warning for Facebook–before they dive into China’s market–make sure you have your books in order. Google is allegedly being investigated for tax evasion by the Chinese Inland Revenue Department.
At least some of the investigation relates to how Google has previously treated transactions from Chinese customers to its US head office. Between 2000 and 2003 Google offered Adwords services to Chinese citizens that did no go via the local subsidiary, resulting in no local records from which authorities can check for tax avoidance. A further allegation suggests that domestic customers until 2007 could use agents to place Adwords ads, avoiding a formal invoice and auditable paper trail, possibly in breach of Chinese tax law.
I can hear the conversation at the Googleplex now…
Sergey: We’ve been subpoenaed to appear before the Chinese courts. Someone needs to go.
Larry: Oh crap. Well I’m not going, I’m getting married next month.
Sergey: Well I’m not going. I’m lucky my parents got me out of one communist country, I don’t want to get stuck in another.
Larry: We need to send someone to represent us, someone who can act as our puppet, while we pull the strings.
Sergey: Whoever we send, will certainly get the crap beat out of them.
Larry: Are you thinking, what I’m thinking?
Sergey: Sure am…Eric? Are you feeling lucky?