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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
Perhaps companies that want to do business in country X end up paying taxes in country X instead of trying to scam their way out of it? Government is not free, and nor is it superfluous.
You were so busy stuffing words in that guys mouth I wonder where you got the spare time to build a strawman.
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.
Except that the corporations haven't chosen to go where taxes are LOW; they've chosen the places where taxes are ZERO.
Pain is merely failure leaving the body
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.
Because the race to the bottom has been demonstrated to be such a great idea in all other areas, yes? Healthcare, social security, heck anything with humans in it.
No, states should not have to compete. When you make business in a country you ought to pay its taxes, period. Tax evasion like this should be illegal, and if Google or anyone else doesn't like it - well, nobody forces them to sell ads in Italy.
Assorted stuff I do sometimes: Lemuria.org
Anything that discourages internet advertising is a step in the right direction.
You are welcome on my lawn.
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
Careful with your words... as you are accusing the lot of them of crimes.
Tax evasion is illegal in most locals... tax avoidance is not.
There is a difference, look it up.
This law simply makes tax avoidance a little harder for some in certain circumstances.
Help Brendan pay off his student loans
Someday people are going to finish school with a basic understanding of math and logic.
It is logically impossible for a corporation to pay taxes.
Let's make up an imaginary company that makes cars which have the following costs.
$1000 for materials
$1000 for employee wages/benefits
$1000 for facilities
$1000 for developement
and since they are evil
$0 for taxes
So that car costs $4000 to build and the company wants $1000 for profits so the car ends up going for $5000
Now the gov't closes all the loopholes they were using not to pay taxes and charges $1000 per car in tax
So yay the evil corporation is now paying $1000 in tax and not making evil profits. A company that makes no money does not stay in business very long, so they look to slash costs as fast as they can else people will sell their stock and the value of the company will tank.
So first thing out of the gate they slash payroll. Sorry guys everything else is in on contract or is not liquid like buildings and spare parts. Next the company implements a few efficiency programs and drives down the materials costs and sells off a few buildings. The budget for product development is chopped and finally they raise the price of the car by $100 because the market won't tollerate a $1000 jump.
$975 materials
$750 employee pay/benefits
$975 facilities
$750 development
$1000 taxes yay!!!
$100 price increase
Total $4550 with the new car price now $5100
$550 Profits - wait a second?! We wanted to tax them a $1000 per car that's not right they should have at most $100 in profits.
Hold on it get's better. The next year the company closes 1-2 of the factories and ships them overseas and automates a third along with another $100 bump in price.
$850 materials - less environmental rules to follow overseas, no import tax
$500 employee pay/benefits - overseas labor=cheaper - more machines = few people
$1100 facilities - new buildings cost money
$750 development
$1000 taxes
$100 price increase $5200 car now
$900 profit
Year 3 they just coast with a $100 price bump they are back to the $1000 profit margin per car. So who actually paid the tax? Did the corporation? Sort of for about 3 years. Did the laid off employees pay for it? No but they lost their jobs, but that would have happened anyway with innovation. Did the consumer who wanted the car essentially eat the entire tax. Yep. But wait the price for the consumer only went up $300 for the car, how did he end up paying the entire $1000? Because the government stole $1000 worth of innovation from the company which eventually would have been passed on to the consumer due to competition. Sure the company would have pocketed the bonus profits at first, as they should have for coming up with a better way of doing things, but eventually they would have had to lower their prices to compete in the market. So in the end what should have happened is the price of the car should have dropped to around $4300, but instead it rose to $5300. With inflation that number would be more like $5450 which is a whole another ball of wax of government theft.
Sure the government can go in and fool with regulations and taxes to put more burdens on the company, but eventually they'll figure out a way around them and again the consumer is left holding the bag, with the gov't stealling the profits that should have gone to the consumer in the form of price reductions. If a company can't then they lose money and eventually go under, or in the case with many "crucial" industries end up getting bailed out making the problem worse.
Corporate taxes are the worst kind of low brow, stupid, shoot yourself in your own foot while trying to dump the bill on someone else form of wish full thinking politicians use to pander to a willfully ignorant public who think they are getting something for nothing.
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 :-)