Italy drops controversial Google digital tax

Mon 3rd Mar 2014

Italy has abandoned a law that would have levied new corporate taxes on Google ad spend that was channeled offshore to avoid local Corporate Income Tax.

Italy abandons internet advertising levy

The tax was passed on 23 December 2013.  It required that all search engine Ad Word business would have to be booked through Italian-resident ad agencies and therefore liable to Italian corporation tax.  At present, search engines such as Google are able to sell Pay-per-click advertising to Italian companies through their subsidiaries in other EU countries (typically in lower tax jurisdictions such as Ireland).

The tax was immediately postponed for 6 months in January 2014 until 1 July 2014.  At the time, the move was seen as a tactic to force the OECD and EU to look at reforming taxes on European cross border revenues, and the ability of the likes of Google, Amazon and Apple to avoid higher taxes in countries like Italy.  France had threatened a similar tax earlier in 2013.

The new Italian government confirmed on Friday 28 February 2014 that the tax would not be implemented since it was in contravention of the European Union’s single market rules on the free provision of services across borders.