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Google Advertising Government The Almighty Buck

Italy Approves 'Google Tax' On Internet Companies 236

Posted by Soulskill
from the all-about-the-benjamins dept.
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."
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Italy Approves 'Google Tax' On Internet Companies

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  • by haruchai (17472) on Tuesday December 24, 2013 @09:34PM (#45779669)

    Given the global fiscal debacle, I wonder what took so long. Countries simply cannot afford to leave that kind of money on the table when they have massive debt and double-digit unemployment.

  • by Trepidity (597) <delirium-slashdot AT hackish DOT org> on Tuesday December 24, 2013 @09:34PM (#45779671)

    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.

  • Good (Score:2, Insightful)

    by Anonymous Coward on Tuesday December 24, 2013 @09:35PM (#45779675)

    I expect sociopathic behavior out of corporations, who seek to optimize their income in a shallow way (building up the countries they're in will increase income too, but corporate monetary thinking is very short-sighted) and take advantage of any system that they're in. So governments need to pass laws to prevent that kind of behavior.

    My only concern is that when the laws get too complex, endless loopholes will be found. They need to have a very streamlined definition of corporate income that doesn't leave much room for the kind of semantic wiggling that Google and others are using in these situations.

  • Re:Loophole closed (Score:5, Insightful)

    by BSAtHome (455370) on Tuesday December 24, 2013 @09:55PM (#45779759)

    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).

  • by Great Big Bird (1751616) on Tuesday December 24, 2013 @09:55PM (#45779761)
    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.
  • by Anonymous Coward on Tuesday December 24, 2013 @10:11PM (#45779833)

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

  • by Anonymous Coward on Tuesday December 24, 2013 @10:13PM (#45779847)
    If taxes were zero, many corps would still look to see who will give them the largest corporate welfare package.
  • Re:Loophole closed (Score:5, Insightful)

    by currently_awake (1248758) on Tuesday December 24, 2013 @10:31PM (#45779935)
    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.
  • by Tom (822) on Tuesday December 24, 2013 @10:43PM (#45779979) Homepage Journal

    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.

  • Re:Good (Score:3, Insightful)

    by JoeyRox (2711699) on Tuesday December 24, 2013 @10:50PM (#45780011)
    As of 2012, Google had 18,500 employees in the USA, with a YoY employment growth rate of 33%. The "broom closet" is reserved for countries that like to confiscate productive wealth and burn it in the most unproductive manner manner possible. If countries want some of that wealth for themselves they can change their tax policies.
  • by kqs (1038910) on Tuesday December 24, 2013 @11:22PM (#45780115)

    So, local Italian companies advertising in Italy will pay an extra "Google Tax", while other EU and multinational companies advertising in Italy won't. Thus, they're making local companies pay more than foreign companies. This is not likely to produce the results that the Italian government wants.

    I'm not sure that this is "more sensible". I don't know how to produce a sensible tax system; it may be that such a system cannot exist. I am convinced that it is impossible to exist under the current US lobbying/donation rules, and I suspect that this is the same in the EU.

  • Re:Loophole closed (Score:5, Insightful)

    by gl4ss (559668) on Wednesday December 25, 2013 @12:04AM (#45780289) Homepage Journal

    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".

  • by SuperKendall (25149) on Wednesday December 25, 2013 @12:08AM (#45780305)

    If Italian products are being advertised to Italians, then the service tax on the adds should be paid to the Italian government.

    Why is that so, if all of the equipment the ads are served from is not in Italy?

    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? Or that the blog owner should be required to pay taxes in Italy even though all costs are incurred in the U.S.?

    It's not like the person in Italy it not already paying taxes on his internet connection. It's not like they would not pay taxes if they bought something from the ad. It's not like the company who bought the ad is not paying Italy corporate income tax anyway.

    It makes no sense that someone operating in a totally different state should have to pay any taxes at all based only on where someone is browsing from, or who buys services from them.

  • Such BS (Score:4, Insightful)

    by mha (1305) on Wednesday December 25, 2013 @12:29AM (#45780385) Homepage

    Are you trying to say Google is the result of low US taxes? That is such a load. Californian taxes are HIGH. If next you come back telling me "but Bermuda..." I'll have to point to what you said and ask how Bermuda tax rates have anything to do with the tax policy of the country the company is in?

    Next go and watch this video about the history of the Silicon Valley and go away with your propaganda: http://www.youtube.com/watch?v=ZTC_RxWN_xo [youtube.com]

  • by mike555 (2843511) on Wednesday December 25, 2013 @12:54AM (#45780481)
    Isn't it against European Union laws on freedom of cross-border trade or what's it called properly?
  • Re:Loophole closed (Score:5, Insightful)

    by hjf (703092) on Wednesday December 25, 2013 @01:01AM (#45780503) Homepage

    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 [cuitonline.com]

    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.

  • Re:Loophole closed (Score:4, Insightful)

    by Srin Tuar (147269) <zeroday26@yahoo.com> on Wednesday December 25, 2013 @02:43AM (#45780745)

    > If Italian products are being advertised to Italians, then the service tax on the adds should be paid to the Italian government

    A contemporary, but yet outmoded thought, in my opinion. The internet really shows exactly how old
    fashioned this line of thinking is.

    What is italy ? The idea that a patch of land and history forms a magical entity which give a small group
    of people the right to tax and control the people living therein seems entirely arbitrary to me.
    People both within, and without italy, can access servers both within and without of italy's current ground boundaries.
    The goods and services and even idle chatter moving over the internet can be in any language, sold in any currency
    or other unit of account, or even be given away for free.

    Why should the italian government have any special purview over what is bought and sold over the internet ?
    Who's to say whether a specific ad targets italians or not, the language ? What if the ad is in english, would it still
    be considered to target italians? What is the advertized product is not sold in Euro's, would it still be taxable and
    subject to these regulations ?

    How about a product, made in china, sold to an italian speaking community living in london, hosted by a server
    which physically resides in sweden, and has a .info domain name; how many of these variables
      have to change to make it subject to these new rules?

  • by DaHat (247651) on Wednesday December 25, 2013 @02:52AM (#45780775) Homepage

    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.

  • by peppepz (1311345) on Wednesday December 25, 2013 @04:20AM (#45780951)

    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.

  • by Zumbs (1241138) on Wednesday December 25, 2013 @05:54AM (#45781073) Homepage
    You do realize that most countries tax a corporation on its profits, not on its turnover, right? So, it is not the $5000 price per good that is taxed, but the $1000 of profits. And that the corporate tax rate is quite low, compared to income tax. Where I live, corporate tax has been reduced from 50% to 25% over the last 30 years. And guess what? 30 years ago corporations did turn a profit!
  • by gnupun (752725) on Wednesday December 25, 2013 @05:59AM (#45781083)

    Why is that so, if all of the equipment the ads are served from is not in Italy?

    That's only one half of the equation -- ad server equipment. The other half is the infrastructure (roads, internet, electricity, etc) built by the Italian govt. that makes it possible for an Italian to purchase something from the internet. How is Italian govt being compensated for this cost?

    It makes no sense that someone operating in a totally different state should have to pay any taxes at all based only on where someone is browsing from, or who buys services from them.

    If the customer were physically present in Bermuda, that statement would be correct. However, in this case, the buyer is physically in Italy. So any commercial transaction should attract a sales tax, if such a tax exists in the city.

  • by Zumbs (1241138) on Wednesday December 25, 2013 @09:21AM (#45781539) Homepage

    Your initial statement was a bit more important than you may have thought. At a 0% profit rate, ANY business would have to do something or face being driven out of business. And at a 100% tax rate, well, it would be close to impossible to run a modern business, so the point is moot.

    You argue that any tax increase on profits will be sent directly to the consumer. This, however, carries a number of implicit assumptions:
    1) Increasing the price will not impact sales: Increasing the price by x% may make fewer consumers buy the product, decreasing the sales by y%. This could easily lead to lower total profits for the corporation.
    2) No competition: Competing companies may opt not to increase prices and be able to undercut prices. This allows them to build a larger market share by attracting the customers of those corporations that increased prices.

    Regarding your arguments on cutting cost, this will happen regardless of taxation. Any corporation in a Capitalist economy will look for ways to minimize costs in order to become more competitive and drive out competition.

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