Italy Sidesteps Sales Tax Hike With Levy On Digital Transactions

Italy is preparing to tax digital companies to help fund its 2020 budget as it seeks different revenue streams to avoid a scheduled sales tax hike, sources told Reuters on Monday (Oct. 14).

International internet companies will reportedly have to pay a 3 percent levy on web-based sales. Companies with annual global revenues of $827 million and digital services of $6 million in Italy will be subject to the tax. The sources added that there are still “ongoing negotiations among the ruling parties.”

It is anticipated that the plan will produce roughly $662 million annually. The sales tax hike, estimated at $26 billion, was scheduled to start in January.

Sources told Reuters the proposal will operate under a “self-assessment taxation regime,” meaning the affected companies will tally and submit what is owed.

In the event that the European Union introduces an online tax that applies to all 28 nations, Italy will make the necessary changes to its own plan, they added.

Italy’s plan is in step with suggestions from the Organization for Economic Cooperation (OECD), which said governments should “redraw rules for taxing global giants.”

Italy must submit a draft budget to the European Commission by Oct. 15.

The European Union commissioners-designate said in September that the bloc should come to an agreement on a digital tax if a deal doesn’t happen at a worldwide level by the conclusion of 2020. The incoming commissioners also noted their priorities on the bloc’s financial reforms and fiscal rules in published answers to lawmakers. At the time, it was reported that the new commissioners were set to take office in November following approval from EU lawmakers. Moves to change corporate taxation to reflect the profits that digital multinationals take in have not been able to yield results, as separate nations have varying tax approaches.