March 31, 2011 – BEIJING (Reuters) - Chinese authorities have found three companies linked to Google broke tax rules and are continuing to probe for possible tax avoidance, a state-run Chinese newspaper said on Thursday, raising the possibility of a new bout of pressure on the Internet search giant.
Google, the world's largest Internet search company, responded to Reuters' questions about the report with a statement saying, "We believe we are, and always have been, in full compliance with Chinese tax law."
The Economic Daily called the three companies "Google enterprises in China." But it was not immediately clear whether they are businesses run by Google or possibly separate entities that may do business with it, through, for example, selling advertising on web pages.
Even if the report is unfounded, it could mark a new bout of pressure in China on Google, which early last year quarreled with the government over Internet censorship and claimed hacking attacks.
"The taxation authorities have already investigated and punished the three companies according to the law," said the Chinese-language report.
It said the companies were accused of presenting false and unjustified claims to the total value of 40 million yuan ($6 million). The report did not say when the claimed violations are alleged to have happened.
"It is understood by this reporter that the taxation authorities are further investigating Google businesses in China on suspicion of tax avoidance," said the brief story, which was also reported by China's official Xinhua news agency.
The three companies named in the report included two that did not use the Chinese name for Google (Guge) in their names, as well as one called the Google Information Technology (China) Company Ltd. Google did not answer Reuters' questions about whether those businesses have any relationship with it.
Last year, Google complained about censorship in mainland China and, after months of wrangling with Beijing, rejigged its main Chinese-language search page so that inquiries are redirected to a site in Hong Kong.
That means that Google searches from within China are still censored by the government's "Great Wall" of Internet filters, but the company no longer plays a direct role in that censorship.
Google has since lost share to rival Baidu Inc in China's Internet market, the world's largest with more than 450 million users.
(Reporting by Chris Buckley; Editing by Lincoln Feast)