Chinese authorities have found three companies linked to Google Inc broke tax rules and examine possible evasion, a State-run newspaper said Thursday that increase the risk of recurrence of internet pressure on the search giant.
Google said two of the companies of the named its units and a third was a separate company, working closely with Google. But Google denied tax violations alleged in the Chinese-language economic daily.
"We believe we are and have always been in full compliance with Chinese tax legislation," said Google.
Although the report is unfounded or embellished, it could bring fresh headaches in China to Google, which has gone through difficult times since the beginning of last year when it clashed with the Government over internet censorship and hacking attacks.
China generates a small percentage of Google's revenue, but is the world's largest internet market with more than 450 million users. The country's Search market, dominated by homemade Baidu Inc, was worth 11bn Yuan (£ 1.05bn) in 2010 and will probably grow by about 50% every year for the next four years, according to iResearch.
The economic daily said the three companies were investigated and punished "Google enterprises in China".
"The tax authorities have already investigated and punished the three companies under the law," said the report on the front.
The companies were charged with submitting false and unreasonable demands for the total value of 40 m Yuan, the report said. It did not say when the alleged violations alleged to have happened.
"It is understood by this reporter that the tax authorities further examines Google enterprises in China on suspicion of tax evasion," said the short story, which also later was reported by China's official Xinhua news agency.
Google said two of the accused companies – Google information technology (China) Co Ltd and Google information technology (Shanghai) Co Ltd – was its sub-units.
It said the third company named, Google advertising (Shanghai) Co Ltd, was a separate undertaking that work "closely with Google as Google's only first-tier reseller in China" of advertising on the search engine's Web pages.
"Most foreign companies in China, particularly high-profile companies with a global reputation at stake, is very cautious in order to ensure they are in full compliance with the relevant tax laws," said Mark Natkin, Executive Director of the Marbridge consulting, a Beijing-based companythat advises investors on China's Internet and telecommunications sectors.
China's Foreign Ministry would not comment directly on the report. "In General, all companies operating abroad should obey the laws and regulations in the host country," said Ministry Spokeswoman Jiang Yu.
The report appeared after Google again clashed with the Chinese Government over internet censorship.
Earlier this month Google said difficulties that users in China may have faced open his e-mail service could be expected to be the result of the Government blocks.
China's ruling Communist Party has intensified censorship in recent months, fearing that calls for protests inspired by anti-authoritarian uprisings throughout the Middle East and North Africa could voyages.
Google's serious problems with the Chinese Government began in January 2010, when the company said it was no longer willing to censor search results in the country. Earlier, the accounts with a disclaimer on its China service that searches cannot be completed due to local laws.
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