Italy has announced that it’s going to follow in France’s footsteps and tax big tech companies, a move that threatens to further complicate relations with the United States over the issue, according to a report by The Wall Street Journal.
France recently announced a similar move, and the new Italy tax will take effect on Jan. 1. It puts a 3 percent levy on some of the digital revenue for companies that have over €750 million in global revenue, with at least €5.5 million in Italy.
There’s currently an effort between over 100 countries to streamline corporate taxation for digital companies, as a majority of countries say big tech companies like Apple and Google don’t pay enough income tax in places where they have users. Many countries have so far held out in taxing, but that reluctance could be waning following the moves by Italy and France.
The U.S., in an attempt to tackle the issue head on, has been negotiating with other countries using the Organization for Economic Cooperation and Development (OECD), which is a think tank that includes wealthy economies. While OECD officials have made some progress, U.S. Treasury Secretary Steven Mnuchin sent out a letter about a potential agreement, and proposed a solution that leaves it up to the companies whether they want to abide by new rules set forth by the OECD, or stick to the way things currently are. Some European countries said that wasn’t a tenable agreement.
“It’s choppy waters. It’s difficult,” said Pascal Saint-Amans, the senior OECD official leading the negotiations. “The first feedback we’ve had [is] that optionality may not be welcome, but it’s the U.S. position and no one can ignore the U.S. position.”
The old rule is that taxes are based on where the value is created, but modern tech companies sell products across borders and don’t get taxed in those countries.
The Italian tax is directed only at business-to-business transactions like advertising and cloud computing, leaving streaming services out of the equation.
Both Italy and France have said they will defer to an OECD solution and would repeal their own taxes in that situation.