Italy Approves Digital Tax Following France’s Implementation

A cellphone and a computer screen display the logo of the social networking site Facebook in a file photograph. (Norberto Duarte/AFP via Getty Images)

Italy passed a digital tax this week that’s similar to the one France implemented earlier this year.

The digital tax will impose a three percent levy on some digital revenue for companies that make over €750 million ($831 million) in global revenue, including least €5.5 million ($6 million) in Italy, the Wall Street Journal reported.

Dozens of countries are working on proposals to change corporate tax schemes to capture money from technology companies that have users across the world, such as Facebook and Alphabet, Google’s parent company.

The United States has engaged through the Organization for Economic Cooperation and Development (OECD ), a think tank of rich economies, but Treasury Secretary Steven Mnuchin said in a recent letter to the organization that there were concerns about a proposal being pushed by some countries.

The United States “firmly opposes digital services taxes because they have a discriminatory impact on U.S.-based businesses and are inconsistent with the architecture of current international tax rules, which seek to tax net income rather than gross revenues,” Mnuchin wrote (pdf).

For a multilateral agreement to be effective, Mnuchin added, “it will need to be implemented through amendments to tax treaties and/or through domestic legislation, which in turn will require broad support.”

He said the United States was urging all countries “to suspend digital tax initiatives” as the organization worked to reach an agreement.

Treasury Secretary Steven Mnuchin testifies during a House Financial Services Committee hearing on Capitol Hill in Washington on Dec. 5, 2019. (Saul Loeb/AFP via Getty Images)

“It’s choppy waters. It’s difficult,” Pascal Saint-Amans, the senior OECD official leading the negotiations, said during a panel in Washington last week, reported the Journal.

“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,” he said.

France’s tax earlier this year sparked condemnation from President Donald Trump’s administration, which said in early December it was considering tariffs of up to 100 percent on wine, cheese, and handbags from France.

The Trump administration said tariffs could be put into place against Italy in light of the new tax.

France’s digital services tax “discriminates against U.S. companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected U.S. companies,” U.S. Trade Representative (USTR) Robert Lighthizer said on Dec. 2.

The tax discriminated against American tech companies like Google, Apple, Facebook, and Amazon, he said.

“USTR is exploring whether to open Section 301 investigations into the digital services taxes of Austria, Italy, and Turkey,” he said in a statement. “The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies, whether through digital services taxes or other efforts that target leading U.S. digital services companies.”