Italy to launch “web tax” in 2020 targeting digital giants

Italy has confirmed that it will implement a 3% web tax on large-scale web-based activity from big digital companies starting next year. 

The new tax will oblige big digital companies such as Facebook and Netflix to pay a 3% levy on some internet transactions after members of the European Union (EU) complained about web giants including Google collecting large profits despite paying little in tax.

Italian Economy Minister Roberto Gualtieri said in a parliamentary hearing on Tuesday: “Profits have to be taxed where they are made.”

In a report by Reuters, digital companies shift earnings to low or even no tax locations such as Ireland which means under international treaties they are protected against paying tax in countries where they do not have what is termed a “permanent establishment”.

The Italian web tax will be applied to companies with annual revenues worth at least €750 million and digital services exceeding €5.5 million.

The measure was originally intended to come into effect in 2019 before it was pushed back until next year and will be implemented through a government decree.

The Treasury forecast last December stated that the web tax would bring in revenues of €600 million from 2020.

Gualtieri also said Italy has asked the European Commission to present a proposal on minimum taxation for companies across Europe.

EU Economic Affairs Commissioner-designate Paolo Gentiloni, a former Italian prime minister, has said he plans to oversee EU efforts to harmonise corporate taxes across the 28-nation bloc.

Gualtieri also said the EU will introduce a tax on digital services even in the absence of a global accord on a web tax.

Last week, Italy launched an investigation into Netflix’s tax evasion over alleged undeclared taxes in the country for media products sold to Italian viewers.

The court in Milan claimed Netflix should pay taxes in Italy despite the fact it no longer has a physical headquarters in the country, a source close to the investigation revealed.

• Read more: Italy launches Netflix tax evasion probe

Netflix chief executive and founder Reed Hastings announced a production partnership with Italy’s biggest commercial broadcaster on Tuesday in Rome, where he confirmed the US streaming service has plans to open new offices in Italy and pay taxes to the country.

The co-production partnership is set to see the development of seven new films spanning historical romance, teen dramas and sport.

The films will be shot in Italian by local production houses including Indigo Film and Lucky Red, with the first five set to premiere on Netflix in 2020.

They will then be aired across Mediaset’s linear channels free for the following 12 months.

• Read more: Mediaset and Netflix announce partnership