China report claims Google-linked firms broke rules

Google, the world's largest Internet search company, said two of the companies Rosetta Stone Language named were its units, and a third was a separate firm that works closely with Google.But Google denied the tax violations alleged in the Chinese-language Economic Daily."We believe we are, and always have been, in full compliance with Chinese tax law," Google said in a statement responding to Reuters' questions.Even if the report is unfounded or embellished, it could bring fresh headaches in China for Google, which has gone through difficult times there since early last year when it quarreled with the one-party government over Internet censorship and hacking attacks.China generates a small percentage of Google's revenues, but is the world's largest Internet market with more than 450 million users. The country's search market, dominated by homegrown Baidu Inc, was worth 11 billion yuan ($1.7 billion) in 2010 and is likely to grow by about 50 percent each year for the next four years, according to iResearch.The Economic Daily said that the three companies investigated and punished were "Google enterprises in China"."The taxation authorities have already Rosetta Stone language software investigated and punished the three companies according to the law," said the report on its front page.The companies were accused of presenting false and unjustified claims to the total value of 40 million yuan ($6 million), said the report. It 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 later reported by China's official Xinhua news agency.A Google spokesperson said the two of the accused companies -- Google Information Technology (China) Co, Ltd, and Google Information Technology (Shanghai) Co, Ltd -- were its sub-units.It said the third company named, Google Advertising (Shanghai) Co, Ltd, was a separate firm that works "closely with Google as Google's sole first-tier reseller in China" of advertising on the search engine's web pages."Most foreign companies in China, especially high-profile companies with a global reputation at stake, are pretty Rosetta Stone Protuguese careful to make sure they are in full compliance with the relevant tax laws," said Mark Natkin, managing director of Marbridge Consulting, a Beijing-based company that advises investors about China's Internet and telecommunications sectors.

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