Italy declares its "web tax" applicable to any digital service worldwide
58 comments
·October 25, 2024bryanrasmussen
kimi
Because I wanted to emphasize the part that HN may care about. There is a lot more content but it's in Italian.
matco11
I haven’t decided yet where I stand on this, however…
…As I understand it, the intent of the law is to avoid that large companies book billions of revenues in the country, but then use price-transfer schemes to book the profits somewhere else, and not pay any taxes locally.
The net effect of the law on larger internet companies is probably marginal, but I am not sure the law was designed well enough, so as to avoid collateral damage on smaller internet companies
bwb
I thought this was what was being implemented to fix that -> https://en.wikipedia.org/wiki/Global_minimum_corporate_tax_r...
Xywzel
The way Italy is implementing their own law looks kinda like ultimatum for others to implement minimum corporate tax law. As was agreed, but then never done because China and US are arguing details and everyone knows last one to implement theirs is likely a winner economically.
kimi
Yes, but now it's for everybody.
mathverse
I am european and I think our countries are in a massive state of decline Slovakia introduced tax on digital financial transactions for next year.
As a European I want OUT of this hellhole.
rgavuliak
Oh, Slovakia is going to continue this trajectory for the next couple of years and beyond if the government doesn't change next elections.
lm28469
If Slovakia is bad look at France or Germany lmao, breathing will be taxed soon enough here
piva00
Slovakia is probably one of the worst countries in the EU in terms of opportunities, maybe just getting out of that specific place might help you? Czechia is right around the corner, Poland as well, and they fare better than Slovakia in pretty much every way.
Edit:
> "Portuguese, Indians, Brazilians are on my no-hire list. They have corruption and cronyism embedded in their DNA."
Ah, just noticed you were the user who posted this stupidity some weeks ago, thought the name was familiar because this comment really showed some true colours. Please, pack your shit and get moving to Russia to stay away from the hellhole :)
lm28469
It's also one of the EU countries with the least debt to gdp, still has industries, good agriculture, 90%+ of home ownership, &c.
France and Germany are in much deeper shit compared to Slovakia, look at property tax, tax on land, income tax, Slovakia is almost a tax heaven in comparison
lifestyleguru
So... crypto will be taxed the same as stocks? The pathology is that in Europe the only untaxed gains are on crypto and real estate (after some years of ownership usually). That's how you arrive to a pathetic state the EU is now dwelling in. Slovakia economically sits on the lap of German automotive. When you visit you see many luxury cars and prices of real estate in village of Bratislava are through the roof, weird isn't it?
piva00
> The pathology is that in Europe the only untaxed gains are on crypto and real estate (after some years of ownership usually).
Where in the developed world do you get untaxed gains on anything? Not even the USA has untaxed gains... Many loopholes if you are rich but you probably don't have access to those mechanisms.
lifestyleguru
In Poland you don't pay gains tax on real estate if you own longer than 5 years. If you own shorter than 5 years you can skip tax when buying another real estate right away. The prices increased 100% in the last 5 years. No limitations for foreigners. Please come buy and invest to make the bubble spectacular. People needing a place to live cannot afford anymore so it doesn't matter.
brnt
Not all of Europe is like Slovakia...
In NL, bitcoin gains are taxable and there is a real estate tax.
barrenko
This continent is hellbent on descending into irrelevancy and self-destruction.
Bright spots include AI research and some spots related to it, like Paris AI community, but the regulators can quickly kill that.
To just register a digital business and make one euro, an average American would cry out laughing.
sva_
> Italy will also raise a tax on capital gains stemming from cryptocurrency such as Bitcoin to 42% from 26%, Leo added.
jandrewrogers
Revenue (not profit) taxes have a bad history and are generally abhorrent because they incentivize many suboptimal things both in theory and practice. Trying to impose this kind of tax on companies that have no meaningful presence in your jurisdiction, subjecting them to these perverse incentives, is going to invite significant backlash. Everything about this seems foolish and poorly thought out.
swiftcoder
Think of it as sales tax for b2b transactions. It's a giant hole in most countries' taxation schemes, where b2c transactions are taxed, but b2b are entirely tax-free.
mdrzn
Are you claiming that Google, Meta and Amazon don't have a meaningul presence in Italy? They're free to not serve their content there then.
jandrewrogers
The issue, which has been raised in diplomatic discussions on this matter, is that multiple countries are claiming the same revenue as “domestic” and wish to tax it simultaneously. This quickly becomes untenable and isn’t a good look for tax policy.
csomar
That's not the problem. You can't tax Google profit in Italy. It's an American company. You can apply sales tax and custom duties, however. This is what this "tax" is. But because of the WTO, they couldn't apply duties, so they are twisting the story.
The WTO agreements and institutions are due to collapse in the next 2-4 years (and nope, am not saying that, see Macron latest interview about cars).
olabyne
i think you are confused. It's not about taxing an american company, it's more about taxing an irish company
timwaagh
Paying tax is normal for most companies. I am not sure why the us is being the slave of these companies and threatening retaliation. Apparently it wants to be the only one to take a cut (despite money being made from Italians). That's extreme. If NATO is a family of mobsters, then this is not how things are done within the family. I know we're not supposed to anger the us as they are the best guarantor for European security and freedom but such bullying tactics, effectively making Italy pay a tribute like a vassal state, does make me question whether we can be independent and guarantee such things ourselves.
Hypergraphe
It is time for the Big Techs financial loopholes in Europe to end.
null
bell-cot
The current HN Title bears zero-ish resemblance to the Reuters article title. And that article seems to assume a load of prior knowledge.
SO - what is the fuss over here? Is Italy doing anything more than say "if you sell digital widgets into Italy, then you gotta pay Italian sales tax on that revenue"?
kimi
Yes - "if you have Italians connecting to your website and look at ads, even if you make $0.01 total, you have to register and pay 3% of that, or else".
This is already in effect for big corps like Google, but now it seems to be for everyone - therefore its presumed relevance to HN.
gyre007
Europe being Europe. But more importantly, I find it a but strange the countries with growing deficits thinking that raising taxes is the right move towards improving the economic situation instead of restructuring
logifail
> I find it a but strange the countries with growing deficits thinking that raising taxes is the right move towards improving the economic situation instead of restructuring
Speaking of restructuring, how about we restructure the way multinationals pay taxes in Europe?
"Amazon pays no corporation tax in Europe despite €44bn sales" https://www.irishtimes.com/business/economy/amazon-pays-no-c...
"Facebook UK pays £29m corporation tax despite record £3.3bn sales" https://www.theguardian.com/technology/2022/oct/06/facebook-...
"Microsoft’s Irish subsidiary posted £220bn profit in single year [..] An Irish subsidiary of Microsoft recorded a profit of $315bn (£222bn) last year [..] The profit generated by Microsoft Round Island One is equal to nearly three-quarters of Ireland’s gross domestic product – even though the company has no employees." https://www.theguardian.com/world/2021/jun/03/microsoft-iris...
newaccount74
Yeah, the reason that governments are introducing revenue-based taxes is because companies found a lot of loopholes to avoid paying profit-based taxes. This creates an unfair advantage of foreign companies compared to local companies, who have to pay taxes on their profits.
I wonder how they are going to game revenue based taxes?
qaq
You do realize there is trade imbalance between EU and US in favor of EU. VW USA BMW USA ASML etc. do exact same thing. IF EU starts changing rules US will mirror those changes an EU will have a net loss. The MS example is about corp structure change and some wiered accounting consequences MS net profit for all of 2020 was 44 billion globally.
barrenko
This idea is lost on an average EU bloke.
lifestyleguru
> The companies paid $219bn in income tax, just 3.6% of their total revenue of more than $6tn
Meantime dividend tax for an individual in Ireland is a brutal 51%. America is such a greedy leech on Europe's body.
CalRobert
Oh! Is it down from 52%? Don’t forget taxing your unrealised gains in etf’s.
The mindset is way different. I remember people in Irish tech slack bemused at the idea of saving for something that wasn’t retirement.
victorbjorklund
"Amazon pays no corporation tax in Europe"
You get that european companies selling in the US doesnt pay american corporate taxes right?
stakhanov
If a corporation has operations in a given country including a physical presence and employees and everything, then the profits connected to those operations are absolutely taxable there, regardless of where that entity is incorporated or where its securities are traded or anything like that.
From that perspective, the U.S. operations of a European firm look to the U.S. taxman very similar to the U.S. operations of a U.S. firm, and vice-versa.
The revenues of such operations are usually easy to work out, but the cost-side can be pretty difficult if it's globally distributed and double-taxation treaties are also pretty difficult. This is where transfer pricing and flag of convenience shenanigans come in, allowing these megacorporations to evade the taxman.
It's not like the political will to fix this stuff is not there, but it requires coordinated action from nation-state players, which is not that easy to accomplish.
So, instead, you get these populist governments pandering to their base by going certain things alone in a way that almost certainly backfires economically.
_benedict
There are always local subsidiaries, so these are generally European companies making the profit and paying no tax. Several of these companies famously exploit jurisdictional loop holes with how they define where the value arises to avoid paying much tax anywhere. While there are rules around how they can do this, they do seem to be broken.
evgen
Then maybe the US should change that. Does not change the fact that other countries should be taxing US companies for their local online sales and revenue.
swiftcoder
Raising taxes on foreign multinationals who are profiting off your economy almost certainly is the right move.
Unlike raising taxes on your own citizenry, it has none of the usual downsides.
Y-bar
(As a European) I see the party Brothers Of Italy which currently hold power in Italy as a decidedly hard-line right-wing party. And just like pretty much every other right-wing party with a populist bent they promised a lot of tax cuts to get into power.
But then they realised they had to raise taxes _somewhere_ to afford everything else they wanted to do… So instead of doing a mea culpa they instead put forth this stupid law.
squarefoot
True, but as with every canon right wing party, beside being populist they're also strong nationalists, therefore what applies to them does not apply to us, also because local big businesses are the ones keeping those bozos in power.
Guthur
Because they gave up their monetary sovereignty they have very few options when it comes to funding.
seydor
Success must have a price. Let's call it 'success tax'
idle_zealot
It's called a progressive tax, and it's a great idea.
jstanley
If taxing something discourages it, we should instead create a "failure tax", which you only pay if you don't make very much money, to discourage failure.
Terr_
In that case, have a tax on tax, where the government takes 100% of it's own tax receipts, which should logically lead to no taxation at all, right? :p
unglaublich
A profit tax doesn't discourage increasing profit as long as the marginal gain is positive.
unglaublich
Yes, if your success relies on a complex framework of infrastructure and societal services, then your success owes that infrastructure a share.
teitoklien
That infrastructure does get its share, its called income taxes, sales taxes from products people buy, payroll taxes, mandatory employee provident fund contributions which governments use as their personal piggy bank in a lot of countries , and most importantly the product/service itself, good luck swimming in your pool of tax dollars, when that dollar is worth nothing, because you dont have much products or services to buy with it.
The reality is , recent politicians have been wasting money excessively, 50-60-70% of the tax revenue ends up being lost to corruption, inefficiencies, etc.
One can continue promoting taxing more and more, it’ll just end up killing the golden goose.
The problem is more with the oligarchic style of engagement between big corps and gov, its stifling innovation, making medicines 10000x more expensive than it needs to be, with extremely insane patents stifling competition and small startups defeating old barrons, a overly litigious society which is rampant in most western countries.
We keep losing our free market, and thus losing prosperity of the middle class, and we keep blaming it on not taxing enough…
nhinck3
Is it that different to any sale tax?
newaccount74
The problem with "sales tax", or "value-added tax" in Europe, is that it applies only to consumers.
Businesses can directly deduct any VAT that they pay from the VAT that they owe. If they pay more VAT than they owe, they can get it back.
This means that Google, Meta, etc., who make almost all of their revenue from B2B transactions, effectively pay no VAT.
The "digital services" tax changes that, by introducing a tax on those revenues.
victorbjorklund
"If they pay more VAT than they owe, they can get it back."
Worth noting is that generally means the company has higher costs than revenues (not something you want).
high_na_euv
Well, every gains tax is kind of success tax, aint it?
The original title is "Italy stiffens terms of digital services tax in 2025 budget", which totally fits the required HN length. HN suggests to stick as close as possible to the original title, which given that this title does not overrun the length would be exactly this title.
Why is the title changed so much? I know we're supposed to assume good faith, but in some cases it is difficult.