Just in case you got lost in the holidays, news broke earlier this week that Italy will follow France in levying a digital tax that threatens to widen a crevasse created by France’s decision to do the same.
Italy soon will join France in applying a new tax on large tech companies such as Amazon, Facebook and Google’s parent Alphabet, reports The Wall Street Journal.
Passed this week by Italy’s parliament, the new tax takes effect Jan. 1. The tax imposes a 3% levy on some digital revenue for companies with more than €750 million ($831.5 million on Dec. 26, 2019) in global revenue.
The Italian tax hits only business-to-business transactions such as advertising, as well as services such as cloud computing. It does not apply to digital content streaming services such as Netflix and Spotify.
Officials in many countries believe U.S. tech companies pay too little income tax in the territories where they have users. Most have refrained from imposing their own national taxes until now.
Progress had been made toward an agreement between the U.S. and other countries participating in negotiations to come to an international solution, under the Organization for Economic Cooperation and Development, but some talks were shattered.
Country officials argue and point to decades-old tax rules that now govern laws. Multinational corporations now sell products across borders through search engines, marketplaces, and websites and leave little taxable profit in a country where those products are consumed. They want their respective countries to see a slice of the profits.
The WSJ reports that the European Union has attempted to agree on a uniform digital tax as recently as spring, but abandoned the effort because of opposition from countries such as Ireland and Luxembourg that are home to regional headquarters of several large U.S. tech companies.