14 DAY TRIAL // The Internet tax Italy had planned is officially off the table, the country’s representatives announced.
Also dubbed the “Google tax,” this is one of the first measures the Italian government took last year.
The government then delayed it coming into effect at the start of this year, moving it back to July. The warnings coming from the European Commission that such a tax would be in direct breach of European Union rules seem not to have fallen onto deaf ears.
The measure affected web advertising, which is why, given Google’s heavy presence in this industry, the tax took the company’s name.
Basically, once it came into effect, Italian companies would have had to purchase Internet ads only from locally registered companies, instead of units based in other nations, including Ireland, Luxembourg or elsewhere.
As mentioned above, the controversial tax had lawyers saying that it violated EU laws regarding non-discrimination over commercial activity.
Italy’s tax is actually part of a larger effort in Europe that seeks to put a stop to strategies used by the likes of Google, Apple and Yahoo to shift taxable profits. The companies have been in a bit of trouble in numerous countries, including the United Kingdom, after they paid extremely small taxes although a big part of their revenues came from local advertising partners.
The reason behind the extremely small taxes paid by huge corporations is that the money was being transitioned through Ireland, where taxes are a lot smaller.
The offshore accounts companies have constituted another big problem. For instance, aside from the Ireland subsidiary that handles most of the advertising deals going in Europe, there’s also a Bermuda unit, another fiscal paradise.
The majority of Google’s global income went through that particular unit, with Google moving some $12 billion through there in 2012 alone. Thanks to this move, Google managed to cut some $2 billion off the global tax bill, which is a big number for any company.
Despite all the upset nations, Italy was the first one to take a step against such practices in the hopes of attracting more money for the country’s budget if Internet giants start paying taxes there.
However, while the country seemed to be quite eager to get Google to “settle down” and pay some taxes in the country, only a couple of million euros from the company’s revenue came from the Italian unit. Of course, applied to the whole industry, the numbers could be bigger.