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Italy Approves 'Google Tax' On Internet Companies
recoiledsnake sends this news from Bloomberg:
"Italy's Parliament today passed a new measure on web advertising, the so-called 'Google tax,' which will require Italian companies to purchase their Internet ads from locally registered companies, instead of from units based in havens such as Ireland, Luxembourg and Bermuda. Google, for example, says that it sells nearly all its advertising in Europe from an Irish unit, leaving little taxable profits in the countries where its customers are based. That unit in turn pays royalties to a second Irish subsidiary, which says its headquarters are in Bermuda. Google last year moved nearly $12 billion to the Bermuda unit, the majority of its worldwide income, cutting more than $2 billion off its global income tax bill. Google's Italian unit last year reported total income taxes of just 1.8 million euros, corporate filings show."
Sounds to me like closing a loophole more than instituting a new tax. I realize that is a matter of interpretation, but the idea that google, apple, etc are "really" in Bermuda etc. is such a hoax in the first place.
Given the global fiscal debacle, I wonder what took so long. Countries simply cannot afford to leave that kind of money on the table when they have massive debt and double-digit unemployment.
Pain is merely failure leaving the body
When Google sells some ads to an Italian company, it is not really a Bermuda company conducting business. Deeming the transactions to take place in the location of the customer isn't the only possible rule you could come up with, but it's a vaguely sensible one, and at least more sensible than the status quo.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
I expect sociopathic behavior out of corporations, who seek to optimize their income in a shallow way (building up the countries they're in will increase income too, but corporate monetary thinking is very short-sighted) and take advantage of any system that they're in. So governments need to pass laws to prevent that kind of behavior.
My only concern is that when the laws get too complex, endless loopholes will be found. They need to have a very streamlined definition of corporate income that doesn't leave much room for the kind of semantic wiggling that Google and others are using in these situations.
A better solution would be for Italy to simply lower their taxes until it did NOT make business sense to go through such contortions to avoid them anymore.
But states really do not like the idea of having to compete, so I expect them to try crap like this instead. It wont work well, there will be unintended side effects that are harmful, and ultimately little, if any, more taxes will be collected anyway.
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So what prevents Google for closing their Italian office altogether? Simple tell Italian companies, he is a webpage to buy services and an account in Ireland to pay. If you need help, here is a support number in India or some other location. Somehow I doubt Italy can enforce a rule that says companies can't buy an online service from Ireland.
The nifty thing with the internet is that you can work remotely. Or am I somehow missing the point?
Really this is a global problem, where an entity can set up an extraterritorial operation and avoid taxation.
Amazon does it to avoid sales taxes and so forth in the United States. Google and Apple do it to avoid taxes in particular countries.
Simply these shenanigans will cause states and countries to extend their cooperation across these boundaries. Eventually there will be a national sales tax system, and an international sales tax.
Gross receipts tax; money is received in the country/state/locality where it is paid or from where the transaction buyer originates.
Is it just my observation, or are there way too many stupid people in the world?
Anything that discourages internet advertising is a step in the right direction.
You are welcome on my lawn.
on one hand the vast majority of money the government steals is wasted on corruption and oppression
and on the other hand advertisers are a cancer on humanity so anything that harms them is generally good
I'll give this one a big meh
If Italian products are being advertised to Italians, then the service tax on the adds should be paid to the Italian government.
Why is that so, if all of the equipment the ads are served from is not in Italy?
Are you saying (and you are) that someone in Italy who wanted to advertise on a popular blog hosted in the U.S., should not be able to do so? Or that the blog owner should be required to pay taxes in Italy even though all costs are incurred in the U.S.?
It's not like the person in Italy it not already paying taxes on his internet connection. It's not like they would not pay taxes if they bought something from the ad. It's not like the company who bought the ad is not paying Italy corporate income tax anyway.
It makes no sense that someone operating in a totally different state should have to pay any taxes at all based only on where someone is browsing from, or who buys services from them.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Are you trying to say Google is the result of low US taxes? That is such a load. Californian taxes are HIGH. If next you come back telling me "but Bermuda..." I'll have to point to what you said and ask how Bermuda tax rates have anything to do with the tax policy of the country the company is in?
Next go and watch this video about the history of the Silicon Valley and go away with your propaganda: http://www.youtube.com/watch?v=ZTC_RxWN_xo
Isn't it against European Union laws on freedom of cross-border trade or what's it called properly?
This kind of law has other negative side effects. An italian company can't buy an ad sponsorship slot on a blog in a different country; because the blogger is not a multi-national entity --- they won't have a company registered in Italy.
The potential advertising options for Italian companies just became very limited......
Your logic would be reasonable if the Internet companies were paying equivalent taxation somewhere on the planet, but they don't, they evade it everywhere.
Almost every other corporate entity pays their dues to society in some place --- even merchant ships flying under flags of convenience pay the national taxes wherever they dock, because they have to be physically in places where they can't evade taxation.
But the Internet giants evade every nation's taxes despite doing business in all of them. It's quite clearly not fair for anyone else.
Free movement of goods and services?
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While I agree with the underlying idea of doing something about the tax avoidance, this rule is probably violating the rules of the EU internal market (see http://en.wikipedia.org/wiki/Internal_Market).
What the EU really needs is IMHO a tax harmonization that stops countries like Ireland from attracting corporate headquarters with extremely low tax rates.
Considering countries outside the EU, the measure described in TFA would make more sense. I'm still not 100% convinced, but it would be at least worth discussing.
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The country had its best time in the 50s/60s after the war - with the highest taxes.
Also, myself an entrepreneur (albeit on a small scale) I know not a single entrepreneur including myself who ever looked at tax rates before deciding to become entrepreneurial.
Last, a good infrastructure - not just roads, the legal system!!! - for the most part benefits entrepreneurs and those with money. The worker classes go to small claims court at the most (I want to say it's about small change 99% of the time when they use the system), those who benefits the most from government provided infrastructure are those with something to loose. So if you believe that those who need, use, benefit from something should pay for it you should be asking for higher corporate taxes and local taxes (meaning don't let companies benefit here and pay (no) taxes in Bermuda.
The there's this:
Corporate tax rates US:
http://en.wikipedia.org/wiki/File:US_Effective_Corporate_Tax_Rate_1947-2011_v2.jpg
Corporate, income and cap. gains tax rates US:
http://www.ritholtz.com/blog/wp-content/uploads/2012/08/dfadf.png
You are just plain wrong, historic corporate tax rates were higher, and NOW you have the crisis, the unemployment, the anger - the boom time seems to have been the 50s/60s.
They only pay tax on profit, before the profit they will pay fortunes in branding expenses to a company in a tax free zone. Just like star bucks.
Next loop hole please....
Avoid all this secondary or tertiary manipulation.
Just decree a law that says that a company cannot use a subsidiary in Ireland or Bermuda or wherever and "plan" to not pay taxes. (Avoidance or planning, doesn't matter since the end result is the same, no taxes paid)
Then go after Google, Amazon and others.
Countries already have the porn filters in place. Block Google and Amazon if they start giving you shit.
Another way: demand to see the local subsidiary's bookings. Examine their bank account traffic. If you get no numbers then estimate while aiming high and slap a tax/fine based on the estimate.
This is a non authoritative translation of a part of the law that I believe TFA missed, legal-Italian to plain-Italian to plain-English (as good as I can get it). Italics are mine.
Think about the implications of the part in italics. Your US company buys an ad in English from Google aimed to the US market. Unfortunately I end up seeing it from my computer located in Italy. Ops, somebody is in trouble now, either you, Google, me or a combination of those three parties. There is nothing in the law about what happens in case of violations and to whom it happens.
Furthermore TFA missed that the law binds companies like Google to register a VAT account in Italy, not to pay taxes there. They'll end up paying just VAT there, which by the way comes from Italians, not from Google. The law aims at quantifying the turnover of those companies in Italy, which can only be estimated now. Unfortunately the way it's worded makes it difficult to enforce.
Luckily a motion (in Italian, Google translation to English here) has already been filed to suspend it. For another take on it you can read this Google translated post from wired.it.
PS: odd thing to do for me on Christmas morning :-)
Why is this only being applied to Internet companies? There many multinationals in every facet of industry avoiding paying taxes, these kinds of laws should not be limited to new industries they should apply to everyone.
All countries sould be moving to a model where companies are taxed on money earned within the country which completely negates the importance of tax havens.
Google made it very clear last time one of their tax avoidance schemes was picked up by the press our government. They think they should pay more tax and wouldn't mind doing so, but they aren't going to be the stupid ones paying more while everyone else is avoiding paying. In fact they suggested that governments should close some of the loopholes so that everyone would have to pay.
I try to pay as little tax as possible.... :\
at you sheep arguing about taxes, which didn't exist in america the way they do now, before they enslaved you
They both achieve the same objective with the same intents and views.
That, and if there was a difference, they usually cross over to the illegal anyway.
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The other half is the infrastructure (roads, internet, electricity, etc) built by the Italian govt.
A) It was built by private companies, who paid taxes in Italy.
B) The consumer browsing pays for electricity, and for an ISP, all of whom also pay taxes in Italy.
C) The people of Italy and shipping company that operate on roads there pay taxes on Italy.
Any time I see someone say "well what about the roads" I can tell they either no nothing about anything or really have put zero thought into what they are saying.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
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