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."

Comments

Loophole closed

[timeOday]

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.

Re:Loophole closed

[BSAtHome]

The problem, however, is that it may run afoul of European law by discriminating between national and European registered companies. It will depend heavily on the exact wording and application of the law whether the EU will allow it.
The loophole should be closed on EU level, but /that/ is a hard thing to do with all the lobbying going on. Maybe it is time that the tax-systems get better harmonised between EU countries and sanity can be implemented (I know, utopian thoughts, but still).

Re:Loophole closed

[currently_awake]

If people in Italy are paying money for something, then the income comes from Italy and should be taxed in Italy as income. If Italian products are being advertised to Italians, then the service tax on the adds should be paid to the Italian government. We need to very carefully define where things are happening on the internet, there is a lot at stake for the world. Also it should not be legal for companies to put a clause in their EULA selecting a legal jurisdiction of their choice, when neither the customer nor the company are actually doing anything in that jurisdiction.

Re:Loophole closed

[gl4ss]

look man I'd agree with that ONLY IF GOOGLE DIDN'T HAVE FUCKING SALESMEN WALKING AROUND IN ITALY.

but they do. that's all what the local offices basically do, selling advertisements and finding customers for the ads.

if the sillyness doesn't stop then soon enough I while in europe I won't be buying from my swedish/finnish/german/whatever grocery store even if I go into the store.. they'll just technically make the business of buying happen in Ireland... and the store is just a "showroom" and a "delivery cache".

Re:Loophole closed

[hjf]

Agreed, as another example:

Google Argentina S.R.L. is an actual company. You can see their data here:

http://www.cuitonline.com/detalle/33709585229/google-argentina-s.r.l.html

Their credit status:

GOOGLE ARGENTINA S.R.L. CITIBANK N.A. 10/13 1 1733,6 N/A -
(means Google took a loan from Citi for ARS 1.73M or USD 300,000)

AFIP (federal tax agency) reports Google Argentina SRL has a few tens of employees.

So. Why should they NOT pay taxes in Argentina, if they are a registered company, with employees, who enjoy the benefits of being a company here (for example, they can take a loan). And they make their profits here and send them abroad completely untaxed.

I hate paying taxes as much as anyone else. But what google does is not fair game. It doesn't allow companies to develop within the country: I'm pretty sure the first ting Larry and Sergei did wasn't exactly to register their company in the Cayman Islands. That was later, when millions already poured in, and creative accountants took over. They are simply exploiting a loophole.

Lots of comments come here from americans, who are very loud about anti taxing, and yes, I fully agree that paying taxes sucks, but you have to understand this: the US prints the world's money. Italy doesn't. All international transactions are made in USD. Italy (and any other non-US country) loses money from their reserves to pay google. Google takes this money offshore. They do the same in the US, but it doesn't matter, as the US simply keeps printing more and more money to compensate (why do you think the USD is so devaluated?). Another thing to notice is that in most of the world, "technicalities", the really nitpicky details you see in police procedural dramas, don't apply. In most of the world, a cop doesn't have to read your rights. And laws are thorough and redundant, leaving little room for argument. And no, lawyers don't have a sexy job of sweet talking a judge. It seems most of you understand that judges rule according to how nicely a lawyer puts his arguments. That's complete bullshit, at least outside the US. A judge won't accept crap like "the suspect crossed the state line as he was firing so technically he fired from another state and his trial is null here".

Making really stupid observations such as "the physical servers aren't in Italy" is incredibly shortsighted. Google is providing a service, and making money. They should pay taxes *LIKE EVERYONE ELSE*. By no means i say google should pay more, or less. I'm simply saying they should. Along with amazon, and any other company that makes not millions, but billions a year and pays ridiculous sums. They get to subvert the system, make a country lose millions every year in both reserves and lost tax money, unemployment from local companies that go broke because of the unfair competition,etc.

This is just the beginning. Most countries will start applying restrictions like this to international companies once the volume becomes big enough. It's not a problem if a few thousand people across the country make purchases. But it is when millions do every day.

that doesn't seem too unreasonable

[Trepidity]

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.

Re:states dont want to compete.

[Great Big Bird]

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.

Re:states dont want to compete.

[Anonymous Coward]

You were so busy stuffing words in that guys mouth I wonder where you got the spare time to build a strawman.

Re:states dont want to compete.

[haruchai]

Except that the corporations haven't chosen to go where taxes are LOW; they've chosen the places where taxes are ZERO.

Re:states dont want to compete.

[Tom]

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.

A good first step

[PopeRatzo]

Anything that discourages internet advertising is a step in the right direction.

Re:Internet megacorps not on level playing field

[DaHat]

they evade it everywhere.

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.

Re:From Italy, yes, otherwise...

[viperidaenz]

The equipment isn't in Bermuda or Ireland either.

It makes no sense that a Californian company is paying tax in Bermuda when it does nearly no actual business there.

Re:From Italy, yes, otherwise...

[peppepz]

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?

Yes. What's exactly wrong with that? If I bring three packs of cigarettes inside the EU, I will get fined at the border for evading something like 20 € of taxes, and my name will even end up into the list of smugglers. Even though the money was mine, and the cigarettes were made outside my country. Nobody has ever objected against that, because paying taxes is seen as normal. So if eluding 20 € of taxes is a crime, why should eluding 10 billion € be considered fair?

It's not like the person in Italy it not already paying taxes on his internet connection.

They're two different services, two different persons earning money, two different tax returns.

It's not like they would not pay taxes if they bought something from the ad.

It depends. If they buy them on Amazon, they won't pay a penny of taxes to Italy, thanks to the same Ireland-Bermuda trick, even though Amazon competes with italian sellers who do pay taxes and present comparable prices to the customers. It's a matter of fair competition, which certainly is very complicated to handle, but can't be dismissed altogether.

The text of the law

[pmontra]

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.

Online advertising spaces and sponsored links in search engine result pages that can be viewed on the Italian territory during a visit to a web site or when using on online service on landline or mobile network, must be bought exclusively by companies with a registered Italian VAT account. This applies also to the case in which the sale has been made by the means of media centers, third parties and advertisers.

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 :-)