Italy's prime minister floats the idea of a 'digital tax' to get web giants to pay up

Matteo Renzi has dusted down a proposal to make the likes of Google and Facebook pay more tax on sales of digital services in Italy.
Written by Federico Guerrini, Contributor

What goes around, comes around. After having buried a similar proposal by his own Democratic Party colleague Francesco Boccia in 2013, Italy's prime minister Matteo Renzi has announced the introduction of a 'digital tax'.

The levy, which will come into force in 2017, is aimed at making web giants such as Google and Facebook pay more tax in Italy - and not, as it is often the case, paying tax on sales actually made in Italy in lower-tax third countries like Ireland.

The surprise announcement came on the political talk show Otto e mezzo, while Renzi was being interviewed by the popular La7 channel's anchorwoman Lilli Gruber.

"I'm a big fan of Apple and Google, but I think it's a matter of justice," he said, adding that Italy has been waiting for two years for a European regulation on the topic. "From January 1, 2017, we envision a digital tax that will be applied through different mechanisms, to make companies pay taxes in the place where agreements and transactions are made."

He didn't elaborate on how such a decision could be implemented, but, as several observers have pointed out, a draft proposal for such regulation was recently presented in Parliament by the Scelta Civica party's MP Stefano Quintarelli, and the undersecretary of economy Enrico Zanetti.

According to the proposal, a 25 percent tax should be applied to every transaction where a multinational sells a digital service or product in Italy. The proposal says the tax should be applied to every foreign company that has had revenues of more than €5m for more than six months from the products it sells in Italy.

A 2013 study by the Polytechnic of Milan estimated the total value of such transactions at €11bn, meaning that the Italian state could collect as much as €2bn or €3bn from the new taxation.

At the time of Boccia's proposal, critics suggested the new levy could be in conflict with European regulations and that its underlying philosophy would go against the idea of a digital single market so cherished by Brussels' commissioners.

Renzi's was one of the harshest critics of Boccia's 'Google tax', but one explanation for his change of direction, according to some observers, is that the announcement is just a political move, aimed at speeding up the shared European solution to the problem of 'tax avoidance' by internet corporations.

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