News Analysis: Italy mulling tech tax

Source: Xinhua| 2019-07-12 22:04:51|Editor: xuxin
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by Eric J. Lyman

ROME, July 12 (Xinhua) -- Italy is at a mid-way point in the process of creating a digital services tax similar to the controversial tech tax just introduced in France, though analysts said political considerations would determine when the Italian version will enter into force.

France defied pressure from the United States when it gave final approval to the plan to tax large technology companies 3 percent on revenue generated in France. For the tax to be applied, the companies must have global sales of at least 750 million euros (845 million U.S. dollars) with at least 25 million euros of that generated in France.

The United States opposes the measure because the majority of the estimated 30 companies that meet the criteria are based there, including Amazon, Facebook and Google. But companies based in China, India, the United Kingdom, and at least one company in France itself will be affected.

According to media reports, the French tech tax -- which is levied in addition to other taxes the companies may pay -- is expected to add around 400 million euros to the French Treasury's coffers this year and more than 1 billion euros in 2020.

"Many countries believe digital companies pay less than their fair share in taxes," Antonello Seppi, corporate tax analyst with ABS Securities, told Xinhua. "Of course, the companies themselves disagree. Now France is the first European country to take a step like this and Italy and a few other countries may soon follow suit."

Italy included its digital services tax in its budget plan for this year, which was finalized in December 2018. But the tax will not go into effect until the country issues a decree to activate the measure.

"When will the decree be issued? That depends on political considerations," said Raffaele Barberio, director of Key4biz, a leading technology and digital communications portal, in an interview. "There are laws in Italy that wait for years before the decree is issued."

The Italian law would apply to high-tech companies with annual revenues of at least 750 million euros -- the same as in France -- though in the case of Italy they can have a much smaller footprint in the country, requiring annual revenue there of just 5.5 million euros. Like the French version, the Italian tax would be 3 percent on the revenue each company generates in the country.

There is no formal estimate on how much tax revenue the Italian initiative could generate, though any new tax revenue would be a welcome development for the cash-strapped Italian government.

"The ice is finally starting to melt on these kinds of tax plans and countries are moving forward," Barberio said. "The companies will have to pay the tax" because they are not likely to leave the country.

"For all the revenue it generates in Italy, Google employs around 100 people in the country. Facebook has 35 million accounts in Italy and around 30 workers. It's not a real threat if they say they will leave and take a few dozen jobs with them," he said.

The European Union is mulling its own three percent tax on big tech companies. But that tax would require the backing of all member states to become law, something that could become difficult to obtain as individual states begin passing their own versions of the law.