The local Parliament has recently passed a new measure on Internet advertising dubbed “Google tax”. The latter will require Italian companies to purchase their web adverts only from Italian companies, instead of from those with headquarters in tax heavens like Ireland, Luxembourg and Bermuda.
Some may believe that it’s a good way to curb the tax avoiding antics of giants like Google and Apple, who claim they are based in Ireland and Luxembourg, but it is actually more about protecting Berlusconi’s media empire from online intrusion.
Most countries in the world have seen the worldwide web as an important tool for business, but Italy for some reason refused to invest in the Internet, so its only backbone provider Telecom Italia is years behind the rest of the European Union. The industry observers joke that the weakened Internet made the TV industry not to think much about changing its formats, so the latter keeps running 1970s style comedy performances.
Of course, the new tax law has caused heated debates. First of all, it violates EU laws regarding non-discrimination over commercial activity. The matter is that you cannot discriminate, in law, among people in different countries of European Union.
The worst part here is that that the law doesn’t do what Italy claims it does – stop tax evasion. The law says that Italian advertisers have to purchase their online advertising from a company registered in Italy. As such, this doesn’t mean that Google’s profits from advertising would be taxable in the country, because selling via an agent doesn’t create a permanent establishment under the local law. Moreover, without a permanent office in Italy Google’s profits aren’t taxable in the country. So, Google just needs to appoint an agent with an Italian VAT number to meet the law and avoid taxation.
In other words, the new law will make Google spend another minute to appoint an Italian agent, and even then it’s likely to be destroyed by the European Union. The experts see this move as an example of the Italians trying to do something decent to solve their crisis, but lacking the bottle to do anything significant to solve a real problem.